Foreword
This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.
As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.
If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.
China
The recent news out of China have been mostly pretty terrible:
- Tech crackdown
- For profit education crackdown
- Crypto crackdown
- Rising energy prices due to energy shortages
- Manufacturing slowdown
- Property markets rapidly cooling after Evergrande debacle
United Kingdom
Not to be outdone, the UK has its own troubles:
United States
And of course, the USA cannot possibly be left out:
- Debt ceiling shenanigans
- Rising unemployment
- Spending bill stalemate… between Democrats
- Worst S&P 500 performance since March 2020… Yes, THAT March 2020.
Globally
And all of these, during one of the worst global supply chain problem ever.
Where to from here?
Normally, the days just before the end of a quarter will see some rather dramatic fireworks in the stock markets because large funds sometimes need to rebalance their portfolios, and/or window dress their holdings for the quarterly reports. At the same time, certain systemic strategies need to buy (or sell) in large quantities based on how different assets have performed over the quarter.
All these are compounded by the expiry of the quarterly options on September 30th, as well as the quad expiry (index futures, index options, single name options and single name futures) on September 17th, which too tend to drive volatility up.
Also usually, the volatility tends to mellow out a bit once the new month/quarter starts — there is only so much excitement traders can take!
But as I sit here, at around 10pm Eastern looking at the futures market, the price action doesn’t strike me as “mellowing” — around 8.45pm, it appears someone important sneezed, because S&P 500 futures just took a ~80bps nosedive in about 30minutes. Yea, yea, overnight futures markets have low volume, sometimes little things make big noises, this could be nothing, etc.
Let’s hope tomorrow’s markets won’t be the wrong shade of green…. again.
Janky Thoughts 