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      Back buying Momentum

      Hedge funds have been buying the US momentum factor recently.

      Back buying Momentum
      Source: JPM PI
      Nets crawl back

      The 4 week change in net went from one of the most negative to one of the most positive.

      Nets crawl back
      Source: JPM PI
      Net leverage

      Overall net leverage now at a respectable 87th percentile on a 3-year look-back.

      Net leverage
      Source: GS Prime
      GS: There is no systemic risk

      Feedback from conference call held Sunday.

      1. 50% of Americans will contract the virus (150m people) as it's very communicable. This is on a par with the common cold (Rhinovirus) of which there are about 200 strains and which the majority of Americans will get 2-4 per year.

      2. 70% of Germany will contract it (58M people). This is the next most relevant industrial economy to be effected.

      3. Peak-virus is expected over the next eight weeks, declining thereafter.

      4. The virus appears to be concentrated in a band between 30-50 degrees north latitude, meaning that like the common cold and flu, it prefers cold weather. The coming summer in the northern hemisphere should help. This is to say that the virus is likely seasonal.

      5. Of those impacted 80% will be early-stage, 15% mid-stage and 5% critical-stage. Early-stage symptoms are like the common cold and mid-stage symptoms are like the flu; these are stay at home for two weeks and rest. 5% will be critical and highly weighted towards the elderly.

      6. Mortality rate on average of up to 2%, heavily weight towards the elderly and immunocompromised; meaning up to 3m people (150m*.02). In the US about 3m/yr die mostly due to old age and disease, those two being highly correlated (as a percent very few from accidents). There will be significant overlap, so this does not mean 3m new deaths from the virus, it means elderly people dying sooner due to respiratory issues. This may however stress the healthcare system.

      7. Global GDP growth rate will be the lowest in 30 years at around 2%.

      8. S&P 500 will see a negative growth rate of -15% to -20% for 2020 overall.

      9. There will be economic damage from the virus itself, but the real damage is driven mostly by market psychology. Viruses have been with us forever. Stock markets should fully recover in the 2nd half of the year.

      10. There is NO systemic risk. No one is even talking about that. Governments are intervening in the markets to stabilize them, and the private banking sector is very well capitalized. It feels more like 9/11 than it does like 2008.

      Goldman Sachs
      We gonna need a bigger chart

      Gross leverage for US fundamental long/short funds is going exponential. 99th percentile over the past 5 years. Have no fear.

      We gonna need a bigger chart
      Source: GS Prime
      Best month ever

      Mag 7 (the ETF) just had its best calendar month ever... and is up 26% since 4/7.

      Best month ever
      Source: @EricBalchunas
      Gross back to highs

      HF gross leverage (across All Strategies) increased in May, now at the 98th %-tile on a LT basis. Net leverage also started to rebound and is up to the 58th %-tile across All Strategies over the past 5 years.

      Gross back to highs
      Source: JPM PI
      Globally too

      Global Info Tech saw the largest notional long

      buying in over 5 years

      Globally too
      Source: GS Prime
      Superlatives

      "US equities were net bought for a 4th straight week. This week’s $ US long buying – led by single stocks – was the largest since last November (97th percentile 5-year), suggesting increased appetite by HFs to carry idiosyncratic risk. 10 of 11 US sectors were net bought (sans

      Real Estate), led by Info Tech stocks which collectively saw the largest $ long buying in more than 10 years." (chart shows tech buying in the US at 10-year high).

      Superlatives
      Source: GS Prime
      Marvelous May

      We just completed the single best month of May for stocks in the last 35 years.

      Marvelous May
      Source: Carson