Market Rally Analysis: Investors, Shorts, and Valuation

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The Most Important Thing

risk is largely a matter of opinion

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Al

Alex

·4 years ago
shared a chat session in group #The Most Important Thing
Hedge fund short covering volume in the past 35 days (since the start of year) is 99.8th percentile going back 10 years. How do we view this and how are we playing it moving forward?
 
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Todd Smith

SPY is up 7.6% YTD. It already went posi...
Disagree. I would not consider the market as whole, expensive. Speculative assets got beaten to a pulp for over a year and for good reason. In an upturn, speculative and risky assets tend to go up first. This could very well be a bear market rally and I expect everything to go down a bit due to the aggressive rate hikes that have yet to permeate through the economy. However, I don’t believe that the market is overvalued by any stretch of the imagination. Add to that there is still a lot of money on the sidelines ready to pounce.

 
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Alex

I wouldn't trust this data. What hedge f...
The data source is a research firm I pay for called Hedgeye, which gets daily or at most weekly data - I believe their source is “prime brokerage” data, though I may be wrong there

 
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Alex

Interesting mixed messages around Powell last week: - the narrative was that Powell was dovish, and the market rallied on that - the US 2 year yield, which is seen as the market’s prediction for what the Fed will do, ripped higher in the last 3 days, implying Powell will be hawkish. This is one of the biggest moves we’ve seen through the whole bear market As long as the cost of capital continues to rise and the Fed isn’t pumping liquidity in, I tend towards viewing rallies at bear market rallies to fade

 
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D J

wsj.com/articles/short-se..
Short Sellers Feel the Pain in Stock Market’s 2023 Rally

www.wsj.com

Short Sellers Feel the Pain in Stock Market’s 2023 Rally

Highly shorted shares are racing past the S&P 500 this year, and short sellers are down by $81 billion.

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Jerome Cody

Disagree. I would not consider the marke...
You say that, but the market is expensive. Both on the Schiller PE and the normal PE ratio. Add that we now have declining earnings ex-energy and it is even more expensive. multpl.com/s-p-500-pe-ratio multpl.com/shiller-pe Nop value stocks usually lead. Furthermore the leaders of the past are not the leaders of the next upmove. Would be a world's first. As I said with current interest rates a lot of that money will not come. But yeah the market is overvalued. You might not believe it, but on every factor we are still expensive. There are a lot of value stocks similar to 2000 that are very cheap, but the overall market is still expensive.

www.multpl.com

S&P 500 PE Ratio

S&P 500 PE Ratio chart, historic, and current data. Current S&P 500 PE Ratio is 22.01, a change of -0.25 from previous market close.

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