US Data Outperforms, Financial Markets Face Volatility Spike🤝

Furthermore, from a volatility perspective, long-end rate volatility (term premium) has worryingly overtaken the short-end (Fed), as concerns on coupon supply and inflation anchoring appear to be growing increasingly entrenched. Furthermore, equity VIX has broken out of their year-long dolrums with implied volatility at the highest levels since the SVB crisis, and SPX futures closing beneath their 200-day MA for the first time since March. It looks like Q4 2023 is going to be a tough quarter to end what is already another tough year.

On the topic of the economic slowdown, US hard data surprises have continued to outperform soft data worries, as the underlying economy continues to climb the wall of worry. However, with that being said, cracks are starting to show under the facade, with regional bank stocks now trading back to SVB lows on continued loan losses and PNL pressure from higher funding costs, while credit and CDS spreads on junk bonds have jumped back to May wides.

#Volatility #Inflation #SoftData #JunkBonds #CreditSpreads