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SignalPlus Morning Briefing 13 Dec 2022

SignalPlus

Democratizing Options for Digital Assets

发布日期: 2022年12月13日

A 3% bounce in oil pushed energy stocks up by +2.5% today, front-end yields higher by +3.5bp, and the USD stronger against most majors as markets made their final adjustments pre-CPI. Furthermore, the New York Fed released consumer survey data which reported lower inflation expectations, where “median one-, three-, and five-year-ahead inflation expectations decreased to 5.2 percent, 3.0 percent, and 2.3 percent, respectively”, and that median inflation uncertainty decreased in the short-term and medium-term horizons.

With the easing in survey data, the market is now certainly looking for a downside surprise in CPI, where expectations are for a 0.3% MoM% rise across both headline and core. Key variables will likely come from the changes in core goods, which are sensitive to fluctuations in used car prices. Furthermore, changes in OER (owner’s equivalent rent, 24% weight) will continue to have an outsized impact on CPI, though the recent sell-off in home prices are expected to put a lid on prices in the near-term.

Trading activity and volatility across asset classes are expected to drop dramatically after Thursday, though it’s interesting to note that equities, commodities, and bitcoin are expected to see a positive vol term structure beyond year-end, but FX and interest rate vols are expected to further compress. We see this to be suggestive that investors are?prepared?for a scenario where the Fed continues on their dovish pivot, which will help soften rates and FX uncertainties, while the liquidity-sensitive sectors such as stocks, crypto, and commodities are expected to benefit.

As a result, downside equity put hedges might look more appealing than outright shorts for bearish expressions, USD-upside calls are interesting for traders to fade the Fed pivot, and outright vol selling in BTC might also be attractive if crypto sensitivty to macro continues to de-correlate in 1H2023.