TME Weekend: Some still have plenty of room to add

Equity positioning: Some still have plenty of room to add

"Systematic strategies have been raising exposure steadily but have plenty of room to add while discretionary positioning is holding on at elevated but not extreme level"

Source: Deutsche Bank

12 rules of life

Premium subscribers could on Saturday see 12 charts on sentiment & positioning that all indicate that this rally is not shortable yet, from a pure positioning perspective. You become a Premium subscriber here: https://www.zerohedge.com/premium

Small-caps rarely perform this poorly

Recent performance has been relatively terrible, with the rolling 12M performance for the RTY-SPX reaching nearly -2SD when looking back at 1990. That has tended to be the level that has preceded extreme outperformance of small vs. large.

Source: Jefferies

Small-caps rarely get this cheap vs large caps

When using a simple NTM P/E ratio, the RTY is trading at just a 13% premium to the SPX. That level is near recent lows and well-below where the relative valuation bottomed in the GFC. As a result – and unlike large caps – small might be pricing in some pretty bad news already.

Source: Jefferies

Two cents on the US consumer

1 - Real wages are growing and turning positive now. In other words, inflation is falling faster than wages, which is a positive for spending.

2 - MS economists turn more bullish on durable goods in early ’25. At that point, MS think most of the deflation headwinds will be behind us, housing activity begins to pick up off lower rates, and 2025 should be the start of the next replacement cycle (typically lasts 5-7 years and COVID started in 2020). (Morgan Stanley)

Santa’s present to US consumers

Cheap gasoline is lending support to near term spending.

Source: Macrobond

Perfect landing?

Markets expect employment to rebound, but inflation to keep falling.

Source: Macrobond

Source: Macrobond

For now, it’s job done on inflation

"Inflation will remain well contained in the next six months as Covid distortions continue to drop out of the calculation. This will spur the Fed on to cut rates mid-year, to avoid default tightening of real yields when growth is already below trend"

Source: TS Lombard

Bond's relative stress

Another day (Friday), another new all time high for the MOVE/VIX ratio.

Source: Refinitiv

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