LD Macro Weekly Report (2023/06/19): The market sentiment is improving, and the global increase in positions is in progress

Summary

The rally led by AI; is gradually developing into more stable optimism, market breadth is improving, and more stocks are participating in the market rally. At the same time, stable inflation data and investors are actively adding positions. Will support the stock market.

The digital currency market fell sharply last week after the "FOMC" raised interest rates sharply, but the sentiment improved after Friday and basically recovered the decline, and the overall correlation with the stock market further declined. This week, including Powell's testimony, a large number of "Fed" official speeches will allow the market to conduct a round of more precise pricing on "+; 50; bp".

Market Performance

Benefiting from the Federal Reserve's decision to pause interest rate hikes and data showing rising U.S. consumer confidence and spending, the S&P 500 ended last week higher for a fifth straight week, its longest weekly winning streak since fall 2021, when The Fed hasn't started raising rates yet. The tech-heavy Nasdaq Composite rose for the eighth straight week, its longest weekly winning streak since the start of 2019.

Last week, most sectors of the U.S. stock market rose. The worst performing sector was the healthcare sector, which fell 2.85%. The best performer was still durable goods, which rose 5.28%. The technology sector regained momentum:

Interest rate market last week;1;–;3;M;Ultra-short bond yields fell slightly,;2;Years rose (mainly because;Fomc;raised end-of-year forecast for interest rates;50;bp),;30; Years and; 10; years are basically flat:

In other markets, Japanese stocks, Hong Kong stocks, Chinese stocks, copper, and crude oil rose, the U.S. dollar index and gold fell, and digital currencies fell sharply after the suspension of the "FOMC" hawks, but basically recovered after Friday:

The 60-day rolling correlation between digital currencies and the stock market further declined, refreshing the lowest level in 7 months in 2021:

Money flow, positions, emotions

EPFR; international financial flows

According to the EPFR data, the flow of global funds in the week ending June 14th, in short, the U.S. stocks, especially technology stocks, have inflowed substantially, the Chinese and Japanese stock markets have flowed in, European stocks have flowed out, and monetary funds have flowed out. Bond inflows:

Both equity and fixed income funds had net inflows, with net inflows to global equity funds increasing to $22 billion, up from $8 billion previously.

This net inflow is mainly due to demand for US stocks, especially large-scale inflows into US technology sector funds. However, outflows from Western European equity funds continued, while inflows from Japanese equity funds increased.

Among emerging markets, mainland Chinese equity funds received net inflows, while outflows from Korean equity funds deepened. At the sector level, inflows to tech funds remained high, especially compared to other cyclical sector funds such as energy.

It is worth noting that the assets of money market funds decreased by 38 billion US dollars, which was the first net outflow in 8 weeks.

Deutsche Bank's comprehensive position data

According to the summary of Deutsche Bank, the position allocation of US stocks rose further last week, moving to the overweight area (z Score 0.38;, historical; 64; percentile), reaching the highest level since January; 2022;. Considering the data lag and the optimism of the market sentiment in the past two weeks, the current actual position may be higher. Among them, the positions of subjective and institutional investors jumped at the same time, and subjectively dominated the increase in positions in the past two weeks.

As can be seen from the figure below, the so-called "atic investors" (that is, funds with systematic investment strategies, mainly institutional investors) have taken the lead in increasing their positions since "March" this year, but in the past two weeks, the "Discretional Investors (subjective investors, because these investors are easily affected by emotions, you can understand that they represent the positions of retail investors). Similar institutions first increased their positions, and the subjective strategy follow-up scene can be traced back to "2019", and the two began to resonate from the middle of the year until the arrival of the new crown at the beginning of "20".

It can be seen that from last year to the end of May this year, subjective investors have been firmly maintaining a low allocation. Along with interest rate hikes, liquidity recovery, and economic momentum deceleration, new pessimistic views continue to emerge in the market. But as time passed, the stock market did not sell off, but rebounded steadily, and then subjective investors finally changed from underweight to overweight last week. At the same time, the market finally jumped out of the big technology stocks and showed a general rise. It boosted its position further last week, reaching its highest level since April 2022.

Compared with historical data, the current subjective investor position level is at the historical; 54; percentile, at a neutral level, and institutional positions are at a relatively high; 74%; percentile, on the high side, and the two integrated position indicators are at; 64; The percentile is at a neutral to high level, showing that the current position is not extreme and there is still room for further growth.

The evolution of positions this year is similar to that in 2019. At the start of 2019, institutional investors led the way by increasing exposure as volatility fell from extremely high levels, driving the market higher, while subjective investors used the rally to trim exposure and shift into underweight stocks. Back then, just like today, there were plenty of things to worry about, such as trade wars, an inverted yield curve, weak U.S. and Chinese data, and money piled into big tech companies.

By the beginning of October, 2019, subjective investors were still substantially under-allocated, although institutions have increased their risk exposure to the over-allocated area. However, as equity markets continued to stabilize, subjective investors began to increase positions significantly, turning overweight long before any growth indicators rebounded, driving a strong rally in the last quarter of 2019 and then until 2020 The outbreak came to an abrupt end.

CFTC; Futures Data

Last week, the net long position of US stock futures rose further to the highest level since the end of last year.

Among them, the big blue chips represent the S&P; 500; net longs have increased the most, technology stocks represent the Nasdaq; 100; slightly fell, and small cap stocks represent; Russel; l2; 000; turned into net short positions:

Investor Sentiment Indicator

AAII; Indicators of investor sentiment continue to turn positive, with the proportion of bears falling slightly and the proportion of bulls rising slightly to the highest level in November in 2021:

CNN's Fear & Greed Index set a record high in February this year, and has remained at an extremely greedy level since June 6 (75; above is extremely greedy):

Goldman Sachs' positioning sentiment indicators have risen sharply and are now entering overweight levels:

![LD Macro Weekly Report (2023/06/19): The market sentiment is improving, and the global increase in positions is in progress] (https://img.gateio.im/social/moments-7f230462a9-6f6357a0d8-dd1a6f-62a40f) The Bull of Bank of America The bear indicator rose slightly last week and is still in a positive but not extreme range:

Goldman Sachs; Prime Book; Data

Hedge funds invested aggressively in large technology stocks at the beginning of the year, but by June, they stepped up their short-selling efforts, and net inflows of funds began to stagnate. MAGMA — Microsoft (MSFT), Apple (AAPL), Google (GOOG), Facebook (META), Amazon (AMZN) — now collectively make up about 15.2% of Prime’s net exposure to U.S. stocks, despite Compared with the "16.7%" of the previous week, it has dropped slightly, and the peak value in March of 2020 is about "18%". MAGMA; In Goldman Sachs; PB; statistics, the currencies that account for investor positions have also begun to decline.

Additionally, defensive sectors (including consumer staples, healthcare, and utilities) sold off aggressively last week, with healthcare stocks in particular posting net selling for the first time in a week:

Defensive stocks typically hold up during economic downturns because people want products and services in these industries regardless of economic conditions. The current turn of optimism towards the overall macro backdrop can be seen in the withdrawal of funds from the sector.

Our Comments

The rebound of small-cap stocks and value stocks (stocks with relatively good cash flow and low valuation multiples) has finally begun to show leading momentum, and then should continue to switch positions or stick to technology stocks, which is the recent focus.

The recent general rally in the market may have been driven by the capitulation and unwinding of a large number of short positions before, but it does not mean that the market is entering a new cycle. before acceleration), mainly because economic growth in the United States was not strong.

Although the risk of U.S. recession is declining, the current and short-term U.S. economic growth rate is between "0%; -3%; moderate levels. To achieve "3%" U.S. growth requires the promotion of technological innovation. It may be difficult for value and small-cap stocks to really attract large capital allocations during this period. In addition, the decline in inflation is beneficial to technology stocks. During periods of low inflation, stocks related to technology stocks usually perform better. In addition, although the valuation of technology stocks continues to expand, considering the high growth brought about by themes such as "AI" and robots, the current valuation is not exaggerated. It is difficult for funds to find exciting investment hotspots in other themes.

Of course, the premise is that the economy continues to grow moderately and there is no systemic crisis. If the credit crunch resurfaces or inflation re-accelerates, value or defensive stocks could outperform.

In the digital currency market, MakerDao raised the interest rate of Dai deposit (DSR) to 3.49%, which is already higher than the rate of return of tax-free money funds in the United States (about 3.2%), although it is not as good as the tax-deductible Monetary funds generally; 4.2%; ~; 5.1%; rate of return.

This is a very smart move. Some previous blockchain projects want to move the risk-free income of the Federal Reserve subsidy to the blockchain. They need to set up a private equity fund structure, and investors need strict; kyc; and; 10; million The minimum buying threshold of US$+, while "Maker" uses the user's "USDC" to manage off-chain, and the interest harvested is passed through "DSR" subsidy to "DAI" holders, forming a similar money market fund in disguise The product, most importantly there is no; kyc; no minimum buy-in threshold. This solves the problem of how to obtain real-world risk-free returns in the encryption industry. In theory, it is a move that can change the existing pattern of the industry.

In addition, some people may worry that this is considered an "interest rate increase" in the currency circle, which may affect the liquidity of the market? We think this is over worrying. Because "DAI" is a product of over-collateralization and leverage, and it is not the stable currency mainly used in the market, DAI; the return; DSR; pledge has limited impact on market liquidity, and some idle; USDC; or; USDT; may Switching to "DAI" for financial management is a great benefit for the "MakerDao" project.

Follow in the coming week

Federal Reserve Chairman Powell will appear in Congress this week to attend the semi-annual monetary policy report hearing. At that time, members of Congress may challenge Powell on why the Fed believes that it still needs to raise interest rates; 50;

With the end of the Fed's policy meeting in June, many officials will deliver routine speeches, including Fed directors Waller, Bowman, New York Fed President Williams, St. Louis Fed President Bullard, etc., you can pay attention to the internal internal An updated statement on policy positions.

Monday: The U.S. market is closed for June Day (stocks, bonds, and futures are all closed), and market liquidity is expected to be poor

Tuesday: RBA Minutes, NBH Bulletin, Germany; May; PPI, US; May; Building Permits

Wed: Bank of Canada Minutes, UK; May; March; CPI, Powell House hearing

Thursday: Bank of England announcement, Swiss National Bank announcement, Norges Bank announcement, Turkish central bank announcement, Bank of Mexico announcement, Bank Indonesia announcement, Powell Senate hearing

Friday: Japan; May; Month; CPI, UK; May; Retail Sales, Europe/UK/US; June; Manufacturing; PMI