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Thursday, February 25, 2021
The VIX, according to JPMorgan
As an infinite loop timeline currently displays news from the financial markets these days, GameStop (GME) shares doubled in the last trading hour on Wednesday.
This type of stock serves as a disturbing signal for many investors: after all, the random doubling of stocks that have already had dizzying highs and lows does not exactly suggest that everything is fine.
And so we discover that there is a word on the tip of everyone’s tongue today – bubble.
Of course, whenever stocks go up it seems like many are quick to declare or at least warn of possible bubbles.
The whole concept of a “bubble” has just become a catch-all to point to something that someone doesn’t like or a pricing error perceived in the market, no matter how modest that mistake may be.
And so it is with this second picture in mind that JPMorgan’s quant and derivatives strategist Marko Kolanovic writes on Wednesday: “If we want to be thorough in our search for bubbles, there is another asset that is currently in a bubble – the VIX. “
“VIX is now disconnected from the perceived short-term volatility of the underlying S&P 500,” adds Kolanovic, “indicating a bubble of fear and demand from investors seeking to hedge or profit from a hypothetical market sale.”
On Wednesday, stocks rebounded after a few hectic sessions to start the week, with the Dow Jones index closing at a record high. VIX was also under heavy pressure on Wednesday, settling at 21.44 and dropping almost 2 points on the day.
“Given that VIX is at an almost record premium for real equity volatility (~ 400-500% above ‘fair value’), we think that selling the ‘VIX bubble’ represents a good market opportunity,” writes Kolanovic .
In addition, Kolanovic believes that investors are confusing enthusiasm in some parts of the market with enthusiasm in all parts of the market.
“Although there is a lot of talk about bubbles, it is difficult to see one in the broad stock market, where a dominant group (FANGs) has barely moved in 6 months, despite the massive amount of stimulus and an expected economic recovery, Finance that has barely recovered. losses in 2020, and Energy that is still 25% below last year, despite a rising commodity market “, writes Kolanovic.
Adding: “We see some relatively contained market segments that appear to be in a bubble related to electric vehicles (EV), renewable energy and innovation actions. These sectors represent only a small part of the market (for example, electric vehicles make up only 2% of S&P 500), but we see segments that remain cheap, such as energy, where positioning remains very underweight, and we believe that this is only the first entry of the market rally, and that the rotation for cyclicals may happen during the next year. “
And while it is difficult to declare the end of a game when we are only in the first inning, the GameStop situation suggests that this contest can be a lot of fun.
And who doesn’t like fun?
In Myles Udland, reporter and news anchor Yahoo Finance Live. Follow him on @MylesUdland
What to know today
Economy
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8:30 ET: Durable goods orders, January preliminary (1.1% expected, 0.5% in December)
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8:30 ET: Durable goods, excluding transportation, January preliminary (0.7% expected, 1.1% in December)
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8:30 ET: Orders for capital goods not related to defense, except aircraft, January preliminary (0.8% expected, 0.7% in December)
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8:30 ET: Capital remittances not related to defense, excluding aircraft, January preliminary (0.6% expected, 0.7% in December)
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8:30 ET: Initial claims for unemployment insurance, week ended February 20 (825,000 expected, 861,000 during the previous week)
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8:30 ET: Continuing claims, week ended February 13 (4.460 million expected, 4.494 million during the previous week)
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8:30 ET: Annualized GDP quarter by quarter, According to 4Q estimate (4.2% expected, 4.0% in the previous impression)
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8:30 ET: GDP price index, According to 4Q estimate (2.0% expected, 2.0% in the previous impression)
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8:30 ET: Basic personal consumption expenses, According to the 4Q estimate (1.4% expected, 1.4% in the previous impression)
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10:00 ET: Pending home sales, compared to the previous month, January (0.0% expected, -0.3% in December)
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11:00 ET: Kansas City Fed manufacturing activity, February (expected 15, 17 in January)
Earnings
Pre-market
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07:00 ET: Wayfair (Ç) expected to report adjusted earnings of 83 cents per share on revenue of $ 3.77 billion
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07:00 ET: Best buy (BBY) expected to report adjusted earnings of $ 3.47 per share on revenue of $ 17.24 billion
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07:00 ET: Modern (MRNA) is expected to report an adjusted loss of 38 cents per share on revenue of $ 287.62 million
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07:00 ET: Plug Power (PLUG) is expected to report an adjusted loss of 12 cents per share on revenue of $ 88.57 million
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07:00 ET: Norwegian Cruise Line Holdings (NCLH) is expected to report an adjusted loss of $ 1.67 per share on revenue of $ 9.38 million
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7:30 am ET: Domino pizza (DPZ) expected to report adjusted earnings of $ 3.90 per share on revenue of $ 1.39 billion
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8:20 am ET: PG&E (PCG) expected to report adjusted earnings of 21 cents per share on revenue of $ 4.78 billion
Post-market
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After the market closes: Airbnb (ABNB) is expected to report an adjusted loss of $ 9.67 per share on revenue of $ 747.04 million
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After the market closes: DoorDash (FEATURE) is expected to report an adjusted loss of 80 cents per share on revenue of $ 926.71 million
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16:00 ET: Work day (WDAY) expected to report adjusted earnings of 56 cents per share on revenue of $ 1.12 billion
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16:00 ET: Autodesk (ADSK) must report adjusted earnings of $ 1.07 per share on revenue of $ 1.01 billion
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16:00 ET: WW International (WW) expected to report adjusted earnings of 35 cents per share on revenue of $ 316.25 million
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16:00 ET: Live Nation Entertainment (LYV) is expected to report an adjusted loss of $ 2.24 per share on revenue of $ 208.25 million
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4:05 pm ET: Nikola (NKLA) expected to report an adjusted loss of 24 cents per share on no significant revenue
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4:05 pm Eastern Time: Etsy (ETSY) expected to report adjusted earnings of 66 cents per share on revenue of $ 515.64 million
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4:05 pm ET: Virgin Galactic Holdings (SPCE) it is expected to report an adjusted loss of 31 cents per share on revenue of $ 633,625
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4:05 pm ET: Rocket Cos. (RKT) expected to report adjusted profit of 88 cents per share on revenue of $ 3.96 billion
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4:05 pm ET: Zscaler (ZS) expected to report adjusted earnings of 8 cents per share on revenue of $ 147.44 million
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4:05 pm Eastern Time: HP Inc (HPQ) expected to report adjusted profit of 66 cents per share on revenue of $ 14.97 billion
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4:05 pm ET: Salesforce.com (CRM) expected to report adjusted earnings of 75 cents per share on revenue of $ 5.68 billion
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4:10 pm ET: Shake Shack (SHAK) is expected to report an adjusted loss of 12 cents per share on revenue of $ 157.32 million
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4:15 pm eastern time: VMWare (VMW) must report adjusted earnings of $ 2.05 per share on revenue of $ 3.23 billion
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4:25 pm ET: Dell Technologies (DELL) to report adjusted earnings of $ 2.14 per share on revenue of $ 24.52 billion
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4:25 pm ET: Beyond Meat (BYND) is expected to report an adjusted loss of 14 cents per share on revenue of $ 103.57 million
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16:30 ET: Caesars Entertainment (CZR) is expected to report an adjusted loss of $ 1.95 per share on revenue of $ 1.71 billion
Headlines
GameStop shares closed 104% higher in the afternoon; plus 100% after hours [Yahoo Finance]
Europe opens up after rally on Wall Street and Asia [Yahoo Finance UK]
Tesla Temporarily Stops Production on the Model 3 Line in California: Bloomberg News [Reuters]
Highlights of Charlie Munger at the Daily Journal annual meeting [Yahoo Finance]
Yahoo Finance Highlights
The unemployment rate for the lowest quartile of Americans is 23%
The Grand Government Giveaway of 2021
Marriott’s new CEO: ‘We’re seeing green shoots’
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