JPM: “Clients Will Feel More Comfortable Buying Stocks After We See Panic Selling”
One week ago, as stocks tumbled after the bear-market rally fizzled halted abruptly by the 200dma, even Goldman’s biggest trading desk bull, Scott Rubner, capitulated and responding to client questions whether this is the time to sell, he said yes, and warned that as markets enter September, traditionally the weakest month for stocks, with CTAs turning full-blown sellers (see “Now It Gets Ugly: CTAs Turn Short, Have Over $8BN To Sell This Week“), it’s time to play defense (a call which he has doubled down on in his latest note from Friday which we will discuss shortly and is available to pro subscribers).
But it’s not just Goldman (and Bank of America) that warn there is more pain to come: somewhat shockingly – at least to those who still read and believe the weekly notes from Marko Kolanovic – JPMorgan desk trader Andrew Tyler echoed Goldman’s (and BofA’s) skepticism and on Friday wrote that “after 5, consecutive days of selling, we received a number of questions about whether we had seen panic selling. We have not.”
As Tyler explains (maybe to the likes of Kolanovic who will be shocked that it is possible to work at JPMorgan and to have a bearish view of things) what we are seeing is not a bull market but rather a “multi-quarter bear market”, and one of its hallmarks is that it can be characterized as “orderly selloff”, which is to be expected with hedge fund net leverage still extremely low and far greater than normal bearishness (via puts) than in normal selloffs.
As such, JPMorgan still awaits “one of those ‘flush days’ where you have VIX spike to the 40-50 range, the market falls ~4%, and you begin getting calls from relatives about which assets to sell.”
As Tyler concludes “some clients have mentioned that after they see an event like that, then they would feel more comfortable buying dips.”
Sat, 09/03/2022 – 18:00