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"... whilst we see limited upside at an index level European equities can outperform US equities in the event of a slowdown and can provide make an attractive source of diversification from concentration risk in US equities. The valuation gap between US and Europe is now more extreme than ever (33% on 12m fwd PE), even adjusting for sector differences (18%). This extreme valuation gap is not justified in our view given the backdrop of similar macro risk and similar consensus long-term earnings growth rate across both regions. European equities continue to offer a spread in yield over US of 1.7% including dividends and buybacks, this spread is close to all-time-high."
1. Higher-for-longer rates & restrictive policy cause something to break before the Fed is willing to cut
2. Recession finally arrives
3. Optimistic equity volatility finally recouples higher to elevated macro uncertainty & still-stressed rates volatility
SPX has basically traded in the 4520/4580 range since mid November. Long gamma dealers have been "choking on theta" for the past weeks.
The AAII bull - bear spread has exploded to the upside. We haven't seen such a big jump in the spread in a very long time. We have reversed on much smaller moves of the spread at previous occasions...
The VVIX squeeze we outlined last week continues. The gap vs VIX is huge. Last time the VVIX was here, VIX was at 19 ish...
Despite all the excitement, both ways, the DXY is trading without a trend, stuck in a range since last November.