The short volatility trade we took in May and June had performed quite well, as the market went from near-panic mode, to the anticipation of the Goldilock condition once earnings season started. While the economy may not enter into a double-dip recession, we think a Goldilock situation where everything is hunky dorry is unlikely due to the following factors:
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- Interest rates are already at its lowest point, and yet home builders continue their bearishness reflected by the home builder sentiment index towards 3rd and 4th quarters.
- This quarter earnings are being compared to the darkest period a year ago, and expectations have now turned higher. Any earnings disappointment will be amplified going forward.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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