Traders Work On The Floor Of The New York Stock Exchange
By Lucas Jackson | Reuters
For investors still haunted by the sale of monsters last week, market returns are expected to continue, according to quantum guru JP Morgan.
Stocks fell on Wednesday, with the Dow Jones Industrial Average suffering its worst day of 2019 after the bond market flashes a recession warning. Treasury yields, which have adjusted to historically low levels, have further intensified fears of recession. However, drastic movements in equities and returns were simply driven by technical flows in an environment of poor liquidity, according to Marko Kolanovic, the bank's global head of macro quantitative and derivative strategy.
"Despite the major risks, recent movements in capital and bonds have been predominantly technically driven," Kolanovic said in a note to clients on Tuesday. "More than half of the equity moves were driven by systematic rather than fundamental trading."
The strategist estimated that Wednesday's huge sell-off was the result of algorithmic $ 75 billion in sales. About half of it comes from the delta and hedging options, 20% of follow-up strategies, 1
And he said more than half of interest rate movements, including the inversion of the yield curve, were caused by "technical engines" such as bank hedging.
The stock exchange continued for three consecutive sessions after this brutal sale. The Dow jumped nearly 250 points on Monday, and the S&P 500 is now 3 points away from recovering all its losses on Wednesday. The strategist said the stock has more space to release this month and could earn another 2% next week.
"Even after the stock market recovered part of its losses from last week, we could still see capital inflows and superiority at the end of the month," Kolanovic said. "Our model suggests that these flows could lead to even more than 1.5% -2% better stock results next week."
Kolanovic, who holds a doctorate in theoretical physics, correctly called some major market movements both up and down. the last two years, winning him a Wall Street successor. He incorrectly called for a rally at the end of 2018, as markets fell last December. However, he rightly called for the market to recover from this decline and subsequent downturns this year, citing the impact of technical factors on the market rather than the underlying ones