Receive the Morning Letter every Monday to Friday at 06:30 ET directly to your mailbox. Sign in
Thursday 25 February 2021
The VIX, according to JPMorgan
As an infinite treadmill these days contains news about financial markets, GameStop (GME) shares doubled in the last hour of trading on Wednesday.
This kind of action serves as a disturbing sign for many investors: after all, the random doubling of stocks that have already seen a sharp rise and fall does not exactly indicate that everything is in order.
And so we find that nowadays there is one word on the tip of everyone’s tongue – bubble.
Of course, every time stocks rise, it seems quick to explain potential bubbles or at least warn.
The whole concept of a ‘bubble’ has actually become just a catch to point to something that someone does not like or a supposed mispricing in the market, no matter how moderate the wrong price is.
And so it is with this second framework in mind that JPMorgan quant and derivative strategist Marko Kolanovic wrote on Wednesday: ‘If we want to search thoroughly in the search for bubbles, there is another asset that is currently in a bubble – the VIX. “
“The VIX is now disconnected from underlying short-term S&P 500 volatility,” Kolanovic adds, “indicating a bubble of fear and demand from investors looking for a hypothetical market sale.”
On Wednesday, the stock rose after a few turbulent sessions to start the week, while the Dow closed at a record high. The VIX was also under heavy pressure on Wednesday and settled at 21.44, dropping almost 2 points on the day.
“Since the VIX has an almost record premium on the actual volatility in the shares (~ 400-500% above the ‘fair value’), we think that the sale of the ‘VIX bubble’ is a good market opportunity, “writes Kolanovic.
Moreover, Kolanovic thinks that investors in some parts of the market are mistaken for enthusiasm with enthusiasm in all parts of the market.
“Although there is a lot of talk about bubbles, it is difficult to see one in the broad stock market, where a dominant group (FANGs) has not moved for almost 6 months, despite major stimulus and an expected economic recovery, ‘Financials that have barely recovered from 2020 losses, and energy that is still 25% lower than last year despite a commodity bull market,’ writes Kolanovic.
Add: “We see some relatively enclosed market segments appearing to be in a bubble related to electric vehicles (EVs), renewable energy and innovations. These sectors make up only a small part of the market (e.g. Electric vehicles make up only 2% of the S&P 500), but we do see segments that remain cheap, such as energy where positioning remains heavily underweight.We believe that this is only the first turn of the market march, and that the conversion into cyclical can play next year. ‘
And while it’s hard to explain a game when we’re just in the first inning, the GameStop situation does suggest that this game can be a lot of fun.
And who does not like pleasure?
By Myles Abroad, a reporter and anchor for Yahoo Finance Live. Follow him @MylesUdland
What to know today
Economy
-
08:30 ET: Orders for durable goods, Provisional January (1.1% expected, 0.5% in December)
-
08:30 ET: Durable goods excluding transport, Provisional January (0.7% expected, 1.1% in December)
-
08:30 ET: Non-defense orders for capital goods, excluding aircraft, Provisional January (0.8% expected, 0.7% in December)
-
08:30 ET: Non-defense capital shipments, excluding aircraft Provisional January (0.6% expected, 0.7% in December)
-
08:30 ET: Initial unemployed claims, week ended 20 February (825,000 expected, 861,000 during last week)
-
08:30 ET: Continued claims, week ended 13 February (4.460 million expected, 4.494 million during previous week)
-
08:30 ET: GDP annualized quarterly, 4Q second estimate (4.2% expected, 4.0% in previous print)
-
08:30 ET: GDP price index, 4Q second estimate (2.0% expected, 2.0% in previous print)
-
08:30 ET: Core expenses for personal consumption, 4Q second estimate (1.4% expected, 1.4% in previous print)
-
10:00 AM ET: Pending home sales, month-on-month, January (0.0% expected, -0.3% in December)
-
11:00 AM ET: Kansas City Fed manufacturing activity, February (15 expected, 17 in January)
Earnings
Pre-market
-
07:00 ET: Wayfair (W) is expected to report adjusted earnings of 83 cents per share on revenue of $ 3.77 billion
-
07:00 ET: Best Buy (BBY) is expected to report adjusted earnings of $ 3.47 per share on revenue of $ 17.24 billion
-
07:00 ET: Modern (MRNA) is expected to report an adjusted loss of 38 cents per share on revenue of $ 287.62 million
-
07:00 ET: Plug power (PLUG) is expected to report an adjusted loss of 12 cents per share on revenue of $ 88.57 million
-
07:00 ET: Norwegian Cruise Line Holdings (NCLH) is expected to report an adjusted loss of $ 1.67 per share on revenue of $ 9.38 million
-
07:30 ET: Domino’s Pizza (DPZ) is expected to report adjusted earnings of $ 3.90 per share on revenue of $ 1.39 billion
-
08:20 ET: PG&E (PCG) is expected to report adjusted earnings of 21 cents per share on revenue of $ 4.78 billion
Na-mark
-
After closing the market: Airbnb (ABNB) is expected to report an adjusted loss of $ 9.67 per share on revenue of $ 747.04 million
-
After closing the market: DoorDash (DASH) is expected to report an adjusted loss of 80 cents per share on revenue of $ 926.71 million
-
16:00 ET: Working day (WDAY) is expected to report adjusted earnings of 56 cents per share on revenue of $ 1.12 billion
-
16:00 ET: Autodesk (ADSK) is expected to report adjusted earnings of $ 1.07 per share on revenue of $ 1.01 billion
-
16:00 ET: WW International (WW) is expected to report adjusted earnings of 35 cents per share on revenue of $ 316.25 million
-
16:00 ET: Live Nation Entertainment (LYV) is expected to report an adjusted loss of $ 2.24 per share on revenue of $ 208.25 million
-
16:05 ET: Nikola (NKLA) is expected to report an adjusted loss of 24 cents per share on no significant income
-
16:05 ET: Etsy (ETSY) is expected to report adjusted earnings of 66 cents per share on revenue of $ 515.64 million
-
16:05 ET: Virgin Galactic Holdings (SPCE) is expected to report an adjusted loss of 31 cents per share on revenue of $ 633,625
-
16:05 ET: Rocket Cos. (RKT) is expected to report adjusted earnings of 88 cents per share on revenue of $ 3.96 billion
-
16:05 ET: Zscaler (ZS) is expected to report adjusted earnings of 8 cents per share on revenue of $ 147.44 million
-
16:05 ET: HP Inc (HPQ) is expected to report adjusted earnings of 66 cents per share on revenue of $ 14.97 billion
-
16:05 ET: Salesforce.com (CRM) is expected to report adjusted earnings of 75 cents per share on revenue of $ 5.68 billion
-
16:10 ET: Shake Shack (SHAK) is expected to report an adjusted loss of 12 cents per share on revenue of $ 157.32 million
-
16:15 ET: VMWare (VMW) is expected to report adjusted earnings of $ 2.05 per share on revenue of $ 3.23 billion
-
16:25 ET: Dell Technologies (DELL) is expected to report adjusted earnings of $ 2.14 per share on revenue of $ 24.52 billion
-
16:25 ET: Beyond Meat (BYND) is expected to report an adjusted loss of 14 cents per share on revenue of $ 103.57 million
-
16:30 ET: Caesars Entertainment (CZR) is expected to report an adjusted loss of $ 1.95 per share on revenue of $ 1.71 billion
Top news
GameStop shares close 104% higher in the afternoon battle; increase 100% after hours [Yahoo Finance]
Europe starts higher after rally on Wall Street and in Asia [Yahoo Finance UK]
Tesla temporarily stops production at Model 3 line in California: Bloomberg News [Reuters]
Highlights from Charlie Munger at the Daily Journal Annual Meeting [Yahoo Finance]
Yahoo Finance Highlights
The unemployment rate for the lower quartile of Americans is 23%
The Great Government Giveaway of 2021
New Marriott CEO: ‘We see green shoots’
–
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, Youtube, en reddit.
Find live stock market quotes and the latest business and finance news
Consult Cashay for tutorials and information on investing and trading stocks