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Is This The Market Bottom? JPMorgan Explains

Is This The Market Bottom? JPMorgan Explains

Two days ago we shared the latest thoughts from Morgan Stanley’s QDS (quant and derivative desk)…



Is This The Market Bottom? JPMorgan Explains

Two days ago we shared the latest thoughts from Morgan Stanley's QDS (quant and derivative desk) discussing what the "market bottom" may look like. Today we turn our attention to a similar line of inquiry, only this time from JPMorgan's flow desk, courtesy of Andrew Tyler (full note available to professional subs).

"When is when?" for the market bottom?

From a flows perspective Nikos Panagirtzoglou feels that a protracted outflow is unlikely and from a positioning perspective John Schlegel and team highlight both the “bear case” from the “bounce case”.

The SPX closed at 15.8x consensus 2023 ($249) estimates and trades at 17.3x CY estimates ($228); the SPX’s lifetime average P/E is 16.9x (BBG). Stocks are not necessarily cheap and it may be the case that investors require a larger discount before jumping in.

From a macro perspective, the China COVID lockdown situation will be adjudicated in a matter of weeks (or months) but one has to wonder about the RU/UKR situation now that we are seeing additional supply disruptions of commodity exports (natgas in this case), Russia beginning to punch back on sanctions (levelling their own), and with Sweden/Finland aiming to join NATO what is Putin’s reaction function?

Mapping back to the US, the more time spent at elevated inflation will increase the fear that the Fed eventually has to step-up its tightening efforts, which typically ends in a recession. The counterargument to this last point is, how much farther beyond neutral would the Fed have to go to counteract the elevated consumer cash pile?

Further, recessions typically are initiated by a credit crunch that leads to higher unemployment. Given the state of corporate balance sheets, how quickly could these conditions change to force some distress?

Next, looking at the latest equity fund flow data, JPM is skeptical of the idea that April’s equity fund outflow, the highest outflow since March 2020, is only the beginning of a likely more protracted phase of outflows in reversal to 2021’s record inflows.

By taking into account both flows and performance, the bank calculates that equity funds globally lost $6.1tr of AUM YTD, effectively  reversing 60% of last year’s increase. At the same time, bond funds lost $2.1tr of AUM YTD, reversing 80% of last year’s increase.

In addition, the younger cohorts of US retail investors, which have been investing in the equity market via individual stocks rather than equity funds, have been de-risking since at least last October and their de-risking appears to be well advanced.

Shifting away from fundamentals, in its search for a bottom, JPMorgan next look at where else could positioning still fall and how
extreme is positioning now?

As we try to assess when we might see a bottom, where are there places where positioning could still fall:

1. Aggregate positioning levels...more room to fall to get to prior extremes? The average 1-yr z-score is near a -2z level (i.e. quite low) for the 6 positioning level metrics in our Tactical Positioning Monitor (TPM). However, when using the full historical data available for each time series, the low was -1.4z in Feb 2016, -1.8z in Dec 2018, and -1.6z in Mar 2020. This compares to the latest reading as of Mon at only -0.8z, i.e. there’s still room for this to fall.

2. Retail flows...could we see larger capitulation? When we look at the single-stock flow, the shift towards less buying / more selling over the past 6 months is quite notable. That said, the magnitude of buying in 2020 (post March) through late 2021 was quite large (i.e. selling could take some time to reverse this) and the recent selling has not quite hit the same levels we saw at the end of 2018 or March 2020.

3. ETF flows...does the euphoric rise in 2021 have to fall back to earth? Looking at the rolling 12M inflows to US ETFs, the outsized inflows in 2021 are fairly apparent. Given the lows we saw in late 2011, late 2015, and late 2018, all of which coincided with market lows, could this be something that continues to deflate and generally creates headwinds for the market until it’s done falling?

As JPM concedes, these are all fairly “bear case” scenarios and not ones that have to play out per se, but given the way the market has been behaving recently, the bank "cannot rule out something like this playing out over time."

On the other hand, and from a more tactical (i.e. very near term) standpoint, the bank writes that there are multiple metrics that suggest we could be closer to a bounce than before, including:

  1. The magnitude of the drawdown in net and gross exposures (-33% for net and - 30% for gross) in N. America among L/S funds is now similar to the early 2016 and March 2020 declines
  2. Retail flows in single-stocks have been very negative over the past 3 days, which has generally coincided with short-term lows over the past 6 months.
  3. The drawdown in “risky” factors (e.g. high vol, small cap, low profitability) is one of the most extreme of the past 20+ years and the S&P has rallied over the following 1-3 months post hitting similar extremes
  4. Buying of Defensives and selling of Cyclicals is also one of the most extreme with Staples vs. Discretionary in particular looking stretched

Next, turning attention to retail traders, who as we explained previously have emerged as the marginal price setters in a market where hedge funds have massively degrossed/delevered, JPM writes that "retail traders net bought $1.1B in the equity market this past week, 1.5 standard deviations below the 1Y average of $3.3B." But more notably they turned outright sellers this week and sold a combined $1.9B in the last two days, which represented the largest two-day outflow in 14 months.

Indeed, as we discussed on Tuesday, the retail buying impulse showed signs of slowing before this latest burst of selling. After adjusting for inverse ETFs, not only is the May MTD net flow negative for the first time since Mar-2020, but also the monthly inflow in April was smallest since Sep-2020.

According to JPM, "the recent market performance undoubtedly played an important role in retail traders’ bearish turn." Looking ahead, the bank estimates that retail traders collectively made approximately 6% return since Jan-2020, significantly underperforming the 24% return of the S&P 500...

... although they appear to be outperforming the much more "sophisticated" risk parity funds who are red since Jan 2020.

Much of the gains made during the pandemic were given back in the last six months. Their activities have also declined, and currently account for approximately 12% of the market volume, down from around 20% at the peak in Jan 2021.

In the options market, retail traders bought $1.6B of delta. SPY/SPX accounted for ~$900MM of the imbalance, and QQQ ~$400MM. TSLA contributed to another $400MM in delta, mostly in the form of put selling. Gamma continued to be in demand (+$1.1B  imbalance). UVXY remained one of the retail favorites, and represented a net buying of ~9MM Vega in VIX futures.

Non-retail market order net sold -$11B this past week. Rotation was observed in favor of the Energy sector (1Y Z-score +2.5) over Technology (-1.9z). Similarly, in the factor space, Value was bought (+1.5z) vs. Quality sold (-2.5z).

* * *

Finally, going back to a point we made earlier this week, that the bottom this time won't be a capitulatory puke, but more likely consistent selling which fades as it burns out, to wit:

... signs of a market bottom are unlikely to resemble traditional "capitulation" that’s played out in the last few years. Why? Because traditional capitulation is typically marked by a quick de-grossing by hedge funds + systematic macro strategies, where positioning is already light. Instead, the next leg of de-risking is likely to be more gradual, coming from asset allocators/real money/retail and is therefore likely slower to play out, making a precise bottom more difficult to call.

... we first note that as of this morning, the max drawdown in the Nasdaq from its all time high to today has surpassed 30% and is now more than the March 2020 pandemic crash...

... and according to SpotGamma, "it seems clear there is major delevering/degrossing (aka “natural sellers”) and that may be what is bringing the large, persistent selling. Put holders aren’t materially closing positions, and they aren’t doing much buying either."

As SpotGamma further writes, this is still a tale of “many markets” wherein stock correlations have not moved to one, and as a result, there hasn’t been any index capitulation (yet) with certain stocks fairing relatively well. Take AAPL for example which is “top quality”, and you can see that IV’s are elevated but not “jumping” increasing despite lower-lows.

Still, with this last SPX move lower, SpotGamma's Delta Tilt reading now matches that of previous major lows, suggesting again that we are at “peak puts”, and (barring a massive rally) there is little to change this signal before 5/20 wherein we’ll lose about 25% of total S&P500 gamma.

Looking ahead, SpotGamma predicts that there is no reason here for volatility sellers to step in, or for puts to be covered, until the May 20 op-ex. That expiration will force some put covering, and the question is will the positive deltas flowing from OPEX be enough to overwhelm whatever “natural sellers” remain.

For more, please read the full JPM note available to professional subs in the usual place.

Tyler Durden Fri, 05/13/2022 - 17:11

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Removing antimicrobial resistance from the WHO’s ‘pandemic treaty’ will leave humanity extremely vulnerable to future pandemics

Drug-resistant microbes are a serious threat for future pandemics, but the new draft of the WHO’s international pandemic agreement may not include provisions…




Antimicrobial resistance is now a leading cause of death worldwide due to drug-resistant infections, including drug-resistant strains of tuberculosis, pneumonia and Staph infections like the methicillin-resistant Staphylococcus aureus shown here. (NIAID, cropped from original), CC BY

In late May, the latest version of the draft Pandemic Instrument, also referred to as the “pandemic treaty,” was shared with Member States at the World Health Assembly. The text was made available online via Health Policy Watch and it quickly became apparent that all mentions of addressing antimicrobial resistance in the Pandemic Instrument were at risk of removal.

Work on the Pandemic Instrument began in December 2021 after the World Health Assembly agreed to a global process to draft and negotiate an international instrument — under the Constitution of the World Health Organization (WHO) — to protect nations and communities from future pandemic emergencies.

Read more: Drug-resistant superbugs: A global threat intensified by the fight against coronavirus

Since the beginning of negotiations on the Pandemic Instrument, there have been calls from civil society and leading experts, including the Global Leaders Group on Antimicrobial Resistance, to include the so-called “silent” pandemic of antimicrobial resistance in the instrument.

Just three years after the onset of a global pandemic, it is understandable why Member States negotiating the Pandemic Instrument have focused on preventing pandemics that resemble COVID-19. But not all pandemics in the past have been caused by viruses and not all pandemics in the future will be caused by viruses. Devastating past pandemics of bacterial diseases have included plague and cholera. The next pandemic could be caused by bacteria or other microbes.

Antimicrobial resistance

Yellow particles on purple spikes
Microscopic view of Yersinia pestis, the bacteria that cause bubonic plague, on a flea. Plague is an example of previous devastating pandemics of bacterial disease. (NIAID), CC BY

Antimicrobial resistance (AMR) is the process by which infections caused by microbes become resistant to the medicines developed to treat them. Microbes include bacteria, fungi, viruses and parasites. Bacterial infections alone cause one in eight deaths globally.

AMR is fueling the rise of drug-resistant infections, including drug-resistant tuberculosis, drug-resistant pneumonia and drug-resistant Staph infections such as methicillin-resistant Staphylococcus aureus (MRSA). These infections are killing and debilitating millions of people annually, and AMR is now a leading cause of death worldwide.

Without knowing what the next pandemic will be, the “pandemic treaty” must plan, prepare and develop effective tools to respond to a wider range of pandemic threats, not solely viruses.

Even if the world faces another viral pandemic, secondary bacterial infections will be a serious issue. During the COVID-19 pandemic for instance, large percentages of those hospitalized with COVID-19 required treatment for secondary bacterial infections.

New research from Northwestern University suggests that many of the deaths among hospitalized COVID-19 patients were associated with pneumonia — a secondary bacterial infection that must be treated with antibiotics.

An illustrative diagram that shows the difference between a drug resistant bacteria and a non-resistant bacteria.
Antimicrobial resistance means infections that were once treatable are much more difficult to treat. (NIAID), CC BY

Treating these bacterial infections requires effective antibiotics, and with AMR increasing, effective antibiotics are becoming a scarce resource. Essentially, safeguarding the remaining effective antibiotics we have is critical to responding to any pandemic.

That’s why the potential removal of measures that would help mitigate AMR and better safeguard antimicrobial effectiveness is so concerning. Sections of the text which may be removed include measures to prevent infections (caused by bacteria, viruses and other microbes), such as:

  • better access to safe water, sanitation and hygiene;
  • higher standards of infection prevention and control;
  • integrated surveillance of infectious disease threats from human, animals and the environment; and
  • strengthening antimicrobial stewardship efforts to optimize how antimicrobial drugs are used and prevent the development of AMR.

The exclusion of these measures would hinder efforts to protect people from future pandemics, and appears to be part of a broader shift to water-down the language in the Pandemic Instrument, making it easier for countries to opt-out of taking recommended actions to prevent future pandemics.

Making the ‘pandemic treaty’ more robust

Measures to address AMR could be easily included and addressed in the “pandemic treaty.”

In September 2022, I was part of a group of civil society and research organizations that specialize in mitigating AMR who were invited the WHO’s Intergovernmental Negotiating Body (INB) to provide an analysis on how AMR should be addressed, within the then-draft text.

They outlined that including bacterial pathogens in the definition of “pandemics” was critical. They also identified specific provisions that should be tweaked to track and address both viral and bacterial threats. These included AMR and recommended harmonizing national AMR stewardship rules.

In March 2023, I joined other leading academic researchers and experts from various fields in publishing a special edition of the Journal of Medicine, Law and Ethics, outlining why the Pandemic Instrument must address AMR.

The researchers of this special issue argued that the Pandemic Instrument was overly focused on viral threats and ignored AMR and bacterial threats, including the need to manage antibiotics as a common-pool resource and revitalize research and development of novel antimicrobial drugs.

Next steps

While earlier drafts of the Pandemic Instrument drew on guidance from AMR policy researchers and civil society organizations, after the first round of closed-door negotiations by Member States, all of these insertions, are now at risk for removal.

The Pandemic Instrument is the best option to mitigate AMR and safeguard lifesaving antimicrobials to treat secondary infections in pandemics. AMR exceeds the capacity of any single country or sector to solve. Global political action is needed to ensure the international community works together to collectively mitigate AMR and support the conservation, development and equitable distribution of safe and effective antimicrobials.

By missing this opportunity to address AMR and safeguard antimicrobials in the Pandemic Instrument, we severely undermine the broader goals of the instrument: to protect nations and communities from future pandemic emergencies.

It is important going forward that Member States recognize the core infrastructural role that antimicrobials play in pandemic response and strengthen, rather than weaken, measures meant to safeguard antimicrobials.

Antimicrobials are an essential resource for responding to pandemic emergencies that must be protected. If governments are serious about pandemic preparedness, they must support bold measures to conserve the effectiveness of antimicrobials within the Pandemic Instrument.

Susan Rogers Van Katwyk is a member of the WHO Collaborating Centre on Global Governance of Antimicrobial Resistance at York University. She receives funding from the Wellcome Trust and the Social Sciences and Humanities Research Council of Canada.

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Repeated COVID-19 Vaccination Weakens Immune System: Study

Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19…



Repeated COVID-19 Vaccination Weakens Immune System: Study

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Repeated COVID-19 vaccination weakens the immune system, potentially making people susceptible to life-threatening conditions such as cancer, according to a new study.

A man is given a COVID-19 vaccine in Chelsea, Mass., on Feb. 16, 2021. (Joseph Prezioso/AFP via Getty Images)

Multiple doses of the Pfizer or Moderna COVID-19 vaccines lead to higher levels of antibodies called IgG4, which can provide a protective effect. But a growing body of evidence indicates that the “abnormally high levels” of the immunoglobulin subclass actually make the immune system more susceptible to the COVID-19 spike protein in the vaccines, researchers said in the paper.

They pointed to experiments performed on mice that found multiple boosters on top of the initial COVID-19 vaccination “significantly decreased” protection against both the Delta and Omicron virus variants and testing that found a spike in IgG4 levels after repeat Pfizer vaccination, suggesting immune exhaustion.

Studies have detected higher levels of IgG4 in people who died with COVID-19 when compared to those who recovered and linked the levels with another known determinant of COVID-19-related mortality, the researchers also noted.

A review of the literature also showed that vaccines against HIV, malaria, and pertussis also induce the production of IgG4.

“In sum, COVID-19 epidemiological studies cited in our work plus the failure of HIV, Malaria, and Pertussis vaccines constitute irrefutable evidence demonstrating that an increase in IgG4 levels impairs immune responses,” Alberto Rubio Casillas, a researcher with the biology laboratory at the University of Guadalajara in Mexico and one of the authors of the new paper, told The Epoch Times via email.

The paper was published by the journal Vaccines in May.

Pfizer and Moderna officials didn’t respond to requests for comment.

Both companies utilize messenger RNA (mRNA) technology in their vaccines.

Dr. Robert Malone, who helped invent the technology, said the paper illustrates why he’s been warning about the negative effects of repeated vaccination.

“I warned that more jabs can result in what’s called high zone tolerance, of which the switch to IgG4 is one of the mechanisms. And now we have data that clearly demonstrate that’s occurring in the case of this as well as some other vaccines,” Malone, who wasn’t involved with the study, told The Epoch Times.

So it’s basically validating that this rush to administer and re-administer without having solid data to back those decisions was highly counterproductive and appears to have resulted in a cohort of people that are actually more susceptible to the disease.”

Possible Problems

The weakened immune systems brought about by repeated vaccination could lead to serious problems, including cancer, the researchers said.

Read more here...

Tyler Durden Sat, 06/03/2023 - 22:30

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Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Authored by Jack Phillips via The Epoch Times (emphasis ours),




Robert F. Kennedy Jr. Banned By Major Social Media Site, Campaign Pages Blocked

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Twitter owner Elon Musk invited Democrat presidential candidate Robert F. Kennedy Jr. for a discussion on his Twitter Spaces after Kennedy said his campaign was suspended by Meta-owned Instagram.

Interesting… when we use our TeamKennedy email address to set up @instagram accounts we get an automatic 180-day ban. Can anyone guess why that’s happening?” he wrote on Twitter.

An accompanying image shows that Instagram said it “suspended” his “Team Kennedy” account and that there “are 180 days remaining to disagree” with the company’s decision.

Robert F. Kennedy, Jr. attends Keep it Clean to benefit Waterkeeper Alliance in Los Angeles, Calif., on March 1, 2018. (John Sciulli/Getty Images for Waterkeeper Alliance)

In response to his post, Musk wrote: “Would you like to do a Spaces discussion with me next week?” Kennedy agreed, saying he would do it Monday at 2 p.m. ET.

Hours later, Kennedy wrote that Instagram “still hasn’t reinstated my account, which was banned years ago with more than 900k followers.” He argued that “to silence a major political candidate is profoundly undemocratic.”

“Social media is the modern equivalent of the town square,” the candidate, who is the nephew of former President John F. Kennedy, wrote. “How can democracy function if only some candidates have access to it?”

The Epoch Times approached Instagram for comment.

It’s not the first time that either Facebook or Instagram has taken action against Kennedy. In 2021, Instagram banned him from posting claims about vaccine safety and COVID-19.

After he was banned by the platform, Kennedy said that his Instagram posts raised legitimate concerns about vaccines and were backed by research. His account was banned just days after Facebook and Instagram announced they would block the spread of what they described as misinformation about vaccines, including research saying the shots cause autism, are dangerous, or are ineffective.

“This kind of censorship is counterproductive if our objective is a safe and effective vaccine supply,” he said at the time.

Read more here...

Tyler Durden Sat, 06/03/2023 - 20:30

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