FAST FIVE: Investors Are The Most Apocalyptic Since August 2009, Completely Ignoring Last Week's Quant Crash
Investors Are The Most Apocalyptic Since August 2009, Completely Ignoring Last Week's Quant Crash Less than 10 days ago, Morgan Stanley laid out what was the biggest challenge facing the market: the fact that nobody was prepared, or certainly positioned, for the economy to turn better.
Alongside this, investors have thrown in the towel on any tightening for the foreseeable future, and in September, just 21% of surveyed investors said they expect short-term rates to rise over the next 12-months, a strong reversal from Sept'18 when 87% FMS investors expected higher short-term rates; that said, there was a modest rebound from last month when short-term rate expectations were at their lowest since Nov'08.
Ironically, all this takes place even as investors refuse to accept reality, and a whopping 64% of respondents said they do not think an inversion of the 2s10s US Treasury curve means there will be a recession in the next 12-months.
Finally, outside “trade deal” (38% FMS investors expect no resolution), top 3 most bullish policy actions = German fiscal stimulus, 50bps cut by Fed, China infrastructure = steeper yield curve.
Incidentally, if anything, the chart above confirms just how clueless Wall Street is as a German fiscal stimulus, all €50BN of it, would have absolutely no impact on the bigger economic picture, as that less than is the amount of liquidity the Fed just injected in one overnight repo.