Syz the moment

As highlighted by Goldman Sachs PB: "the amount of shorting in US equities since mid-August is the largest in six months and ranks in the 98th percentile vs. the past decade." Meanwhile, the level of short gamma is the highest in a long time. Dealers have been forced to sell deltas as we have moved lower (chart by Tier1Alpha). This has pressured the market. But we need to keep in mind that gamma works both ways, so a possible bounce from here would force dealers to buy back all that delta they sold recently. Source: The Market Ear

A Bloomberg Intelligence gauge of developer shares fell as much as 6.4% Monday, taking its loss in valuation this year to $55 billion. Evergrande, which scrapped key creditor meetings at the last minute and said it must revisit its restructuring plan, dived 25%. China Aoyuan Group Ltd. was the biggest drag on the gauge, slumping by a record 76% after shares resumed trading. Sentiment has worsened dramatically in recent days as investors brace for years of pain from the ailing sector, with policy support failing to resolve liquidity woes. While developers are pinning their hopes on the upcoming Golden Week holiday period to revive home sales, a rapid cooling of a late-August rally in property shares shows any relief may be short lived. Source: Bloomberg

Big opens then lots of selling. Source: Bespoke

Source: BCG, Morgan Stanley Research thru Compounding Quality

So what could be the effects on the US economy and job market? Below chart shows the effects on GDP depending on the duration of the shutdown. - According to Goldman, a government-wide shutdown would reduce quarterly annualized growth by around 0.2% for each week it lasted after accounting for modest private sector effects. Goldman's baseline is that a shutdown could last for 2-3 weeks (the Trump government shutdown, the longest in history, lasted 35 days, from Dec 22, 2018 to Jan 25, 2019). - Meanwhile, Bloomberg also speculates that in an extreme tail event, the maximum hit to 4Q GDP would be a drag of 2.8% if the shutdown lasts for the entire quarter. Source: Goldman Sachs, Bloomberg, www.zerohedge.com

BofA Harnett says it depends whether the economy is in inflationary or an inflationary period. When monetary policy needs to work harder to slow economy in inflationary era (e.g. 1970s/1980s), Dow Jones returns were most of the time negative in the 3 months and 6 months that followed the last Fed hike... However, in disinflationary period, markets returns were quite strong. So do you believe we are in an inflationary or disinflationary period? Source: BofA Global Research

Long-only institutional & retail investors are all-in overweight tech and meaningfully underweight energy. Will elevated tech valuations, rising long-end yields, and rising oil prices trigger a squeeze in positioning? Source: The Daily Shot, EPFR, DB

Instacart sold 22 million shares at $30 each in an initial public offering on Monday, raising $423 million in the process. The offering, which values the grocery delivery company at around $10 billion, is the second high-profile IPO in a matter of days, after British chipmaker Arm had made its trading debut on the Nasdaq stock exchange last Thursday. With Klaviyo, a marketing automation company, also planning to raise up to $550 million in its initial public offering on Tuesday, this week is a clear sign of life from the U.S. IPO market, which had dried up completely in 2022 after a record-breaking 2021. According to Dealogic data analysed by EY, IPO activity already picked up slightly in the first half of the year, as companies raised $10.1 billion in 63 initial public offerings in the U.S., compared to $4.7 billion in 51 IPOs in the first six months of 2022. With inflation looking likely to have peaked, rate hikes nearing an end and equities having rebounded from last year’s lows, the market backdrop looks more positive now that it did at any time in the past 18 months. Source: Statista