Chris Watling, CEO and Chief Market Strategist of Longview Economics joins Bloomberg Intelligence discusses today's market selloff. (Source: Bloomberg)
Transcript:
CW “I think it's fascinating. It seems to me that we've evolved from sector rotation, which was a mid-July theme, to a rout, a liquidation event.
It's really all about the Bank of Japan's governor, Yoshida, who surprised markets with a 15 bit hike. But then, of course, on top of that, he
talked about the idea that neutral rates are a long way away.
So, in other words, it is a rate hiking cycle.
So the Fed's talked about cutting and we got a bit of that from Powell last week
and the BOJ's raising and they've done that into two extreme
positions in markets. Everyone was short the yen and everyone
was Max long the MAG seven and those both those rate cutting rate cycles
changing influenced that position.
So it's like when a giant repositioning in global markets and a giant liquidity event on the back of it. It's pretty interesting, not to mention the macro data, which we haven't even got to, right?
“Well, looking at the MAG seven index here in the terminal, down almost 5%
today. So on pace for its worst day actually
since July 24th here. So keeping a close eye on that.
But also you move neutral to U.S. equities in late July, actually, it was
ahead of the Federal Reserve's decision last Wednesday.
Kind of unpack us how you're advising clients to position.
Are you telling them to put their money in like would you want to buy?
What would you want to sell at this point?”
CW “I think it depends (obviously) on your time frame. So next couple of months, just be cautious. I think markets haven't finished their sell off today. We're in the midst of it and there's more to come. And generally, when markets sell off too sharply, the price action dictates you get a retest unless we get something dramatic out of the Fed in terms of intermeeting cut or very dramatic, strong signalling.
So in the short term, I’d do that. In the medium term, I think one wants to see this as an opportunity to start moving portfolios around in terms of that global sector rotation.
So my view is that markets have fashions every six or seven years.The global sector leaderships change, it's been tech, it's been strong and we think it's now starting to change, we're coming into a rate cutting cycle. I think we're going to get cyclical reacceleration in the West. And, we think people should
start positioning for that.
That is small and mid-caps in the US, that's overseas equities, non-U.S. equities.
So the headline is we're going back to the noughties in terms of what does well. It's like back to the future all over again. But what goes around comes around. And I think we're going to get a consumer housing boom over the next 1 to 4 years across the Western world. And that's going to change the equity sector leadership in the global stock market.”
“Looking at the VIX here, it's up about 19 points to just north of 42.
It was up to a level of 65 earlier this morning, just blowing out like crazy.
Does that tell you that panic is out there earlier today?”
CW “Well, there's definitely panic, isn't there? I mean, 60 is a big number, I remember when I started in this business, if it went over 24, that’s a big number. And then, of course, that's all changed.
So I think very short term, what people want to watch is do you get a bullish key
day reversal in markets today? You know, obviously they've opened below
the lows to their close above levels that they saw on Friday.
It seems a long stretch from here, but still a few more hours of
trading. This market is very volatile. It can move a lot very quickly. But look, most selloffs happen in three or five waves. So we've had wave one.
We're going to get a relief rally. If you're a trader at some stage over
the course of this week, you want to get involved in that on the long side”
Traders Bet on Fed Rate Cut
August 5th, 2024, 7:32 PM GMT+0100
Chris Watling, CEO and Chief Market Strategist of Longview Economics joins Bloomberg Intelligence discusses today's market selloff. (Source: Bloomberg)
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https://www.bloomberg.com/news/videos/2024-08-05/traders-bet-on-fed-rate-cut-video