Deltec Bank & Trust Ltd. shows, trading in options has in the last two months outstripped trading in underlying cash equities for the first time on record.
(1/3)
60% of options trading is in contracts with less than two weeks to expiration
(2/3)
Well over 2,200 stocks have options contracts listed on an exchange. The VAST majority of trading is in just seven names.
(3/3)
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Yesterday, Jim appeared on Bloomberg TV, warning that if the Fed cuts rates and the market thinks this is wrong, 10-year yields could surge through 5%.
(Perspective ... 10-year yields were last above 5% in October 2023 and as high as 4.85% in January).
🧵
2/8
President Trump disagrees with this thinking and believes the federal funds rate should be 1% right now.
From a "truth" posted on June 30.
3/8
If (or should I say when) Trump gets a Fed Chair to make 1% happen, how will the 10-year react?
Reminder of what happened last year to long rates when the Fed cuts rates (peach arrow) and the market does not think it's a good idea (cyan arrow).
I would argue that if the Fed cuts rates and you assume mortgage rates follow the federal funds rate lower (they may NOT be the case), home prices would rise, putting the monthly payment right back at $2,860.
Polymarket recession odds peaked at 65% on May 1st, the April ISM release date, suggesting Liberation Day and the 20% stock market correction did not damage the economy, as the "soft data" warned.
Subsequent April data confirmed this.
Will May see more of the same?
🧵
2/12
The prevailing narrative in the market for months has been that the labor market is going to fall apart, forcing the Fed to cut rates.
This has not happened, and so far, the "soft" (survey) data have been wildly off in predicting the economy.
3/12
ISM Employment upticked in May from April. The first monthly "May" data point suggests the labor market is still not weakening.
See the red line on the right. With increased tariffs (red line to the left), the prices of goods originating from China are increasing rapidly.
Also note that the Chinese-originated price rise (red line to the right) began around May 1st, the same time truflation started its upward march.
3/5
From the FT:
The Yale Budget Lab says the average US family would pay $2,800 more for the same basket of products purchased last year, should tariffs remain at their current level, with lower-income homes more exposed.
Chinese products being sold in the US have already seen marked increases in retail prices, according to analysis of high-frequency data from PriceStats by Alberto Cavallo of Harvard Business School.