Positioning Is Becoming Less Bullish

SEC approves first ever leveraged Bitcoin Futures ETF. Bitcoin BTC/USD is up 83% in the past 6 months. Is it going higher?

Market

Prices as of 4 pm EST, 6/26/23

Macro 

President Joe Biden is doing his best Franklin D. Roosevelt impression.

• Biden has announced a plan to provide high-speed internet access to every American household by 2030.

• The $42 billion plan has already been approved and will be implemented through the Broadband Equity, Access, and Deployment program.

• States will receive a minimum of $107 million, with some 19 states receiving over $1 billion in funding.

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Investors are beginning to abandon the idea of rate cuts in 2023.

• They aren’t, however, fully embracing the Fed’s latest dot-plot forecast as traders are still currently pricing in a peak after just one more 25bps hike.

• Interest rate traders place a 77% chance on a 25bps raise to 525-550 in July but see rates staying there through year’s end.

• By January, traders expect the target rate to be at 500-525, which implies a 25 bps cut.

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Regional manufacturing activity in Texas rose to its highest level in 3 months in June.

• The Dallas Fed Manufacturing Index improved to -23.2 (vs. -26.5 expected) from -29.1.

• Business conditions weakened, however, with contractions in production, new orders, shipments, and capacity utilization.

• The employment growth and hours worked subindexes also declined.

• On the bright side, prices received and prices paid dropped to their lowest since June 2020 and April 2020, respectively.

@bespokeinvest

Stocks

The next Bond car will be electric…presumably.

• Aston Martin is partnering with EV-maker Lucid in a deal that will see the former buy components like batteries and drive technologies from the latter.

• For its efforts, Lucid will receive $142 million and a 3.7% stake in the British luxury automaker.

• Both companies have been facing financial challenges and view the deal as a way to support long-term growth strategies.

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When stocks rise, the VIX falls, and vice versa…right?

• That long-held rule of thumb has been put to the test over recent weeks as the VIX has hovered well below its long-term average of ~20 even as stocks have rallied.

• In fact, the typically negative correlation between the two has flipped to an extreme.

• Over the last 10 days ending Friday, the correlation between the S&P 500 and VIX reached +0.61, a level not seen in 30+ years.

• Which one gives first?

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Investor positioning has been a tailwind for stocks lately, but that’s starting to change.

• After registering its first “stretched positioning” reading since April 2021 on June 16, Goldman’s Sentiment Indicator posted its second consecutive reading in “stretched” territory last week.

• Aggregate positioning, meanwhile, moved further into overweight territory over the past week and is currently in the 73rd percentile.

• Over that period, positioning for systematic strategies rose sharply to the 84th percentile while CTA positioning increased to the 81st percentile.

Deutsche Bank

Energy

OPEC sees global energy demand rising to 110 million barrels a day by 2045.

• This would push the world’s energy demand up by 23% over that time.

• The cartel sees oil accounting for 29% of the energy mix by then.

• The forecast is at odds with the IEA’s estimates that demand growth will begin softening in the coming years.

Earnings

Yesterday’s highlights:

Carnival Corp CCL: $-0.31 EPS (vs. -$0.34 expected), $4.91 billion in sales (vs. $4.79B expected).

• Revenue more than doubled YoY while losses narrowed by 78% for the quarter.

• Optimism appears to have already been priced in, however, as the stock sold off even after the company raised its adjusted earnings outlook for the year.

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What we’re watching today

• Walgreens Boots Alliance WBA

• TD Synnex SNX

• Jefferies JEF

• Manchester United MANU

• Korn Ferry KFY

• AeroVironment AVAV

Top Headlines

• Stress test: Results of the Fed’s stress tests on banks are scheduled to be released tomorrow afternoon.

• Patent infringement: The Supreme Court rejected Apple and Broadcom’s appeal in a billion-dollar patent case brought on by the California Institute of Technology.

• Wagner: Russia has dropped charges against participants in the Wagner force’s armed insurrection and says the group will hand over its weapons.

• EV bankruptcy: Lordstown Motors has filed for Chapter 11 protection and is suing Foxconn for fraudulent conduct and breaking investment promises.

• HOOD layoffs: Robinhood is cutting about 7% (~150 employees) of its full-time staff in response to a slowdown in customer trading activity.

• F layoffs: Ford is carrying out layoffs affecting engineering jobs in the US and Canada as part of its restructuring efforts under the Ford+ plan.

• Banking AI: Banking giant Mizuho is implementing OpenAI services for all 45,000 of its core lending unit employees.

• Chatbot competition: Baidu says its Ernie bot outperforms GPT-4 on several measures.

Crypto

Prices as of 4 pm EST, 6/26/23

• Asset flows: Digital asset investment products reversed 9 weeks of outflows with the largest single weekly inflow ($199 million) since July 2022.

• Russian crypto: Crypto buying spiked in Russia over the weekend amid the chaos.

• Mining flexibility: Hut 8 Mining has secured a $50 million credit facility from Coinbase to enhance financial flexibility ahead of the upcoming halving event.

• Ether-Bitcoin volatility: Institutional selling of Ether call options has led to a decrease in the spread between Ether and Bitcoin volatility.

• Asian focus: Circle is among a growing list of crypto firms eyeing regulatory developments in Hong Kong where there is “enormous demand for digital dollars”.

Deals

• Acquisition streak: IBM will acquire software company Apptio for $4.6 billion in its 7th acquisition of the year.

• Warehouse focus: Prologis will acquire industrial properties from Blackstone for $3.1 billion in an all-cash deal.

• Data storage: Databricks is acquiring generative AI startup MosaicML for ~$1.3 billion.

• US IPOs: The US IPO market is showing signs of life after 18 months of dormancy following Cava’s successful market debut.

• Media M&A: Media network Group Black is in talks to acquire a majority stake in the publisher of Sports Illustrated.

Meme Of The Day