Markets Weekly August 3, 2024

Hello my friends, today is August 3rd and this is Markets Weekly. So this week was a very volatile weekend markets. We saw tremendous price swings in basically all asset classes, looking at the S&P 500. After the Fed meeting, S&P 500 was surging. It looks like everything was okay. And then Thursday, we sold Friday, we sold a lot and honestly it was getting a bit scary. However, I continue to believe that the highs of the year are not yet in. So today I want to talk about three things that I think are driving this sell off and why at the end of the day, I'm not super worried, at least not yet.

你好，朋友们，今天是8月3日，欢迎收看《市场周报》。本周的市场非常动荡，我们看到了几乎所有资产类别的巨大价格波动，尤其是标普500指数。在美联储会议之后，标普500指数一度飙升，情况看起来一切顺利。但到了周四和周五，我们出现了大规模抛售，坦白说，这让人有些害怕。然而，我依然认为今年的最高点还没有出现。所以今天我想讨论三件事，这些事情是导致这次抛售的原因，以及为什么最终我并不特别担心，至少目前还不会。

So first, it seems like we have the blow up of two very popular trades in the market, the yen carry trade and the short fall trade. Secondly, we have geopolitical issues in the middle east that are heating up and that is having a clear impact on some markets. And lastly, there seems to be a strong bout of recession fears occurring. After we got the non-form payrolls data, the market really, really seemed to worry about a potential recession and honestly, it seems like they're getting carried away.

首先，市场上两种非常流行的交易出现了爆仓现象，即日元套利交易和卖空波动率交易。其次，中东的地缘政治问题正在升温，这对某些市场产生了明显的影响。最后，市场似乎对衰退的恐慌情绪非常强烈。在我们得到非农就业数据后，市场对于潜在的经济衰退真的非常担忧，坦白说，他们似乎有些过于担心了。

Okay, starting with the two trades. Now, globally, every country has different interest rates. Now, in the US, interest rates are on 5.5% in Canada, in Europe, they've been hiking rates for the past few years. However, in Japan, interest rates remain very low. So over the past few years, a lot of people have been borrowing money in Japan, in Japanese yen. And taking that yen, selling it for dollars and then buying, say, dollar assets or even selling it for euros and borrowing euro assets and so forth. Now, over the past few years, people who were in this trade totally, totally hit a home run.

好的，我们先从两笔交易说起。现在，世界各国的利率各不相同。比如在美国，利率是5.5%；在加拿大和欧洲，他们过去几年一直在提高利率。然而在日本，利率依然非常低。所以在过去几年里，很多人采取了一种策略：在日本借钱，用日元，以低利率借贷。然后他们把这些日元兑换成美元，用美元去购买资产，或者把日元换成欧元购买欧元资产等等。这种操作在过去几年里让从事这种交易的人赚得盆满钵满。

So for example, if they borrowed yen and sold yen for dollars and bought the S&P 500, they would have been up hugely on the S&P 500 and they would have won a lot on the currency trade because the dollar appreciated against the yen significantly. So those guys doing really well and what tends to happen is when you have a trade that works really well, a lot of people join in, continue to lever up and it works really well until it doesn't. And over the past two weeks, it has not been working well because the Japanese authorities have been doing things that are strengthening the yen. Now, this first happened when the Ministry of Finance in Japan intervened in the markets to strengthen the yen right after the SOP CPI print a couple of weeks ago.

举个例子，如果他们借入日元，然后把日元兑换成美元，再用美元买入标准普尔500指数股票，他们不仅会在标准普尔500指数上获得巨额收益，还会在外汇交易上赚很多钱，因为美元相对于日元大幅升值。所以这些人在这个操作中获利颇丰。通常，当一个交易策略非常成功时，很多人会加入进来，继续加大杠杆，这个策略就会持续奏效，直到不再奏效为止。而过去两周，这个策略开始失效，因为日本政府采取了一些措施来加强日元的汇率。第一次失效发生在几周前，美国公布了消费者物价指数（CPI）数据后， 日本财务省干预市场以增强日元汇率。

But more recently, this week, the Bank of Japan also became a lot more hawkish. So in this week's meeting, the Bank of Japan did two things. First, they hike interest rates to about 0.25%. Again, it's still really low, but for them, they are being a bit more hawkish. Even as central banks across the road are being more dovish. The second thing they did was they also implemented quantitative tightening. So going forward, the Bank of Japan is going to be shrinking their balance sheet and that should be putting some upward pressure on their long-redated rates. So again, intervention plus more hawkish Bank of Japan, the yen strengthened. And if you look at a chart of the Japanese yen and say the Nasdaq, you notice that they're basically moving together.

但最近一周，日本银行的态度变得更加强硬了。因此，在本周的会议上，日本银行做了两件事。首先，他们将利率提高到约0.25%。尽管这个利率仍然很低，但对他们来说，这已经是比较强硬的举措了。即使在其他央行普遍采取较为温和政策的时候，他们也采取了相对强硬的态度。其次，他们还实施了量化紧缩政策。未来，日本银行将缩减他们的资产负债表，这应该会对长期利率产生上行压力。因此，干预措施加上日本银行的更强硬立场，导致日元走强。而如果你看一下日元和纳斯达克指数的走势图，你会发现它们基本上是同步运动的。

It seems like what's happening is the guys who are doing the trade, again, the yen is strengthening, so they're losing money. So they close out the trade. Again, when you close out the trade, you're selling stocks and you're buying back the yen. That makes it more painful for other people because of course, you push ash at prices down when it comes to the Nasdaq and makes the yen stronger. And that kind of kicks off a cycle of deleveraging. So I think as people are being basically getting margin calls on this trade, it's causing a lot of disorder in the market. Now, ultimately, if you look at the expectation of the path of policy for Japan and the US, the interest rate differential is structurally quite wide. So I tend to think that after this washout, this trade will be again attractive.

看起来发生的情况是做这种交易的人，日元又在升值，所以他们亏钱了。因此他们平仓交易。当你平仓交易时，就是在卖股票、买回日元。这对其他人来说就更加痛苦了，因为这样一来，会推低纳斯达克股票价格，同时让日元更强。这就引发了一个去杠杆化的循环。我认为，由于人们在这种交易上被迫追加保证金，这在市场上造成了很多混乱。不过，如果我们看日本和美国的政策路径预期，两国的利率差仍然是很大的。所以，我倾向于认为经历这一风波之后，这种交易又会变得有吸引力。

Again, if you look past, look at the past couple years, once the yen strengthened significantly, it kind of went back to depreciating. So let's see if that happens. In any case, this has been painful, I think, for a lot of investors. Another very popular trade that's in the market has been the short vol trade. So as you guys see, on the index level, say looking at the VIX, volatility, it wasn't too very recently, very low. There's been a lot of people who are selling volatility on the index level and buying volatility on the underlying single stock level, say the Mach 7. Now, this has worked really well as index level of all has gone down.

再说一次，如果你回顾过去几年，一旦日元显著升值，它就会回到贬值的状态。所以我们看看这次会不会也这样。不管怎样，我认为这对许多投资者来说都是痛苦的经历。另一个在市场上非常流行的交易是做空波动率交易。比如你们看一下VIX指数，波动率指数，直到最近它一直处于非常低的水平。有很多人在指数层面上卖出波动率，同时在单个股票层面上买入波动率，比如Mach 7。这种策略运作得很好，因为指数层面的波动率下降了。

Again, VIX was very low until recently, and the volatility on these Mach 7 stocks have exploded as you had a lot of people making YOLO trades, and those stocks have also done very well as well. Now, these trades work really well, and many articles in Bloomberg written about them, but then of course, they blow up when the index level is spiking and index level of all is spiking. So I imagine there's a lot of people who are unwinding the trade, and as they unwind it, they have to buy back their index level of all short, and that is pushing index level volatility up. Now, you can look at this on a fixed strike basis, or just to be simplified, VIX is a rough approximation. Now, this basically has a chain reaction for many other people in the market, because you have a lot of market participants who adjust their risk positioning based on how much volatility is in the market.

再一次，VIX指数（市场波动率指数）直到最近一直都很低，这些Mach 7股票的波动性突然飙升，因为有很多人进行了 YOLO（孤注一掷）的交易，而且这些股票表现也很好。这些交易非常有效，Bloomberg上有很多相关文章提到这点，但当然，当指数水平飙升时，这些交易也会爆发。因此，我想很多人正在解除这些交易，而在解除时，他们不得不回购之前的股指空头头寸，这推动了指数波动率上升。 你可以以固定执行价来观察这一现象，或者简化来说，用VIX作为粗略的近似值。这基本上对市场中的许多其他人产生了连锁反应，因为市场上有很多参与者会根据市场波动性来调整他们的风险定位。

So let's say volatility is very low, if you're comfortable, things are not moving a lot, maybe they can lever up, but when vol goes up, these guys, they have to cut down their position to maintain the same risk profile. So I'm guessing that as index of all spikes, again, this is kind of a self-perpetuating thing. If you are a short index level of all, as it really goes up, you have to cover and force it to go higher and forces other people to cover again. So that's very painful for them as well. Now, over the past few years, what we've also noticed is that these short vol guys, they always, always come back because this has been a very good trade. If past is any prediction, I think they will probably come back again. However, if they don't, things could obviously get out of hand.

假设波动性非常低，如果你感到舒服，意味着市场波动不大，他们可能会加杠杆。但当波动性上升时，这些人就必须削减他们的头寸以保持相同的风险水平。所以我猜想，当波动率指数飙升时，这种情况会自我延续。如果你是做空波动率指数的人，当波动率真的上升时，你不得不回补头寸，这会推高波动率，并迫使其他人也回补头寸。这对他们来说是非常痛苦的。 这几年我们还注意到，这些做空波动率的人总是会回来，因为这一直是个不错的交易。如果过去的情况能作为预测的话，我认为他们可能还会再回来。但是，如果他们不回来，情况可能会失控。

So I guess we'll find out in the coming weeks. Now, the second thing that I think is contributing to this is geopolitical tensions. So to be clear, the first thing that dies in war is truth. And so it's very hard to get good reporting about what's happening, say in the Middle East or in Eastern Europe. Now, we do all know that there was an assassination in Tehran by Israel of a senior figure in Hamas. So what seems to have happened is that as this senior figure was visiting Tehran, there was a bomb in his hotel room that was detonated and he was killed. Now, this really ratchets up the tensions because basically Israel is assassinating people in another country's territory. That's obviously very provocative. Imagine if someone came to Washington, DC and was assassinating foreign officials. So that made Iran very upset.

所以，我想我们会在接下来的几周内知道真相。现在，我认为第二个影响因素是地缘政治紧张局势。需要明确的是，战争中第一个消失的就是真相。因此，很难得到关于中东或东欧局势的准确报道。我们都知道，以色列在德黑兰暗杀了哈马斯的一位高级人物。看起来这位高级人物在访问德黑兰时，他酒店房间里的炸弹被引爆，导致他死亡。这大大激化了紧张局势，因为以色列实际上在另一个国家的领土上进行暗杀。这显然是非常挑衅的行为。想象一下，如果有人来到华盛顿特区暗杀外国官员，那会引起多大的不满。因此，这让伊朗非常愤怒。

And in addition to that, Israel also carried out a couple other assassinations throughout the Middle East as well. Now, Hamas, of course, has been in ongoing war with Israel as has Hezbollah and other Middle Eastern things. Basically, it's kind of always a mess over there. But this latest step has been an next level provocation and Iran has vowed to retaliate. And I think many people are afraid of an escalating Middle East conference. Now, just this past week, our prime minister Netanyahu in Israel also came to the US. The United States Congress, of course, received a lot of money from Israeli interest. And so everyone there was basically falling over themselves, clapping for Netanyahu. So the perception is that if there's war in the Middle East, the United States will go and send their military and to go and support Israel. So there's a prospect of a very large conflict that also involves the US. Again, I don't know if this is a high probability event, but it's definitely something that has been simmering for some time. Now, the news of this has also has led to a spike in prices like gold, a little bit of a movement in oil. And of course, it's impacting Rick's sentiment in the broader US markets. So I think that's something that is a tail risk. I have no idea it will happen. I don't think anyone does. I've noticed that it's very difficult to predict geopolitical events, but it's definitely some some tail risk that that is hurting risk sentiment.

此外，以色列还在整个中东地区实施了几起暗杀行动。现在，哈马斯当然与以色列一直处于战争状态，真主党和其他中东组织也是如此。总的来说，那边的局势一直相当混乱。但是最近的这一举动更是一次升级的挑衅，伊朗已经誓言要进行报复。很多人担心中东局势会进一步升级。 就在上周，我们的以色列总理内塔尼亚胡也访问了美国。众所周知，美国国会从以色列利益团体那里获得了很多资金，所以国会里的每个人都基本站队内塔尼亚胡，对他大加赞赏。因此，如果中东爆发战争，美国可能会派遣军队支持以色列。这样一来，就有可能引发一场涉及美国的大规模冲突。虽然我不确定这种情况发生的概率，但这一问题显然已潜伏了一段时间。 目前的新闻也导致了金价上涨和油价的波动，当然，这也影响了美国市场的整体风险情绪。所以我认为这是一个潜在的尾部风险。虽然我不知道这是否会发生，但可以肯定的是，地缘政治事件很难预测，而这一潜在风险正在损害市场的风险情绪。

The last thing that I think is contributing to this past week's panic is the prospect of an imminent US recession. So recall, we just got the GDP Brit for the second quarter and it was a very strong 2.8%. So growth so far has been very strong. And the unemployment, the labor market, has been okay as well. Now, this past this week, our latest labor market report was a lot weaker than expected. It was about 100,000 jobs created. Now, again, that that is weaker than expected. But when you look at the totality of the data, it also just the weakening economy.

我认为上周引发恐慌的最后一个因素是美国即将陷入经济衰退的前景。回顾一下，我们刚刚得到了第二季度的国内生产总值（GDP）数据，非常强劲，达到了2.8%。所以到目前为止，经济增长一直很强劲。失业率方面，劳动力市场也表现不错。不过，这一周我们最新的劳动力市场报告比预期要弱得多，新增了大约10万个工作岗位。是的，这确实比预期的要弱。但当你综合所有数据来看，也显示出了经济的疲软。

Now, as we as we usually do, let's not just look at the headline number, but also other aspects as well. So looking one level lower, you notice that the unemployment rate surged from 4.1% to 4.3%. The unemployment rate has been steadily taking higher over the past few months. And it seems to be increasing at an accelerating rate. Now, there's a lot of people who focus on this because there is an imperative, there's what's called a sound Dudley role that notices that when the unemployment tends to rise, it tends to accelerate.

现在，按我们通常的做法，我们不仅要看标题数据，还要关注其他方面。向下一层看，你会注意到失业率从4.1%上升到了4.3%。过去几个月里，失业率一直在稳步上升，而且似乎在加速上升。很多人关注这一点，因为有一种叫做“杜德利法则”的原则指出，当失业率上升时，它往往会加速上升。

And if it accelerates past a certain point, then you are basically in a almost always in a recession looking at data over the past few decades. So many people are pointing to this and saying that this indicates that oh my gosh, the US is in a recession. Now, another thing that was noteworthy in the non-forms payroll was that wages average hourly earnings was pretty low at about 0.2% a month over a month. As one of the lowest prints, it's had in quite some time. So again, weak job creation, tick in the unemployment rate, and also decelerating wages all consistent with the softening labor market.

如果超过某个加速度，那么从过去几十年的数据来看，你几乎总是处于衰退期。因此，很多人指出这表明美国正处于衰退中。另外，非农就业报告中一个值得注意的方面是平均时薪的增长率非常低，约为0.2%每月，这是相当长时间以来的最低值之一。所以，再次强调，疲弱的就业增长、上升的失业率以及工资增长放缓，这些都与劳动力市场的疲软一致。

The market looked at that and I don't see to my surprise thought it was very, very negative. Now, sometimes the market looks at good data and things that good data means fed hikes. That's bad. Sometimes the market looks at bad data, things that how bad data if it cuts and likes it. But this time the market looked at this data and it thought it was bad and it sold in a big way. Now, one thing to note about the non-forms payroll is that it wasn't all bad. One of the things that stood out to me was that the labor force participation actually increased.

市场对这数据的反应让我很惊讶，认为这非常、非常负面。有时候，市场会把好的数据解读为美联储加息的信号，认为这是不好的；有时候，市场会把不好的数据解读为可能会降息，反而觉得好。但这次市场认为这些数据很糟糕，并大规模抛售。有一点需要注意的是，非农就业报告并不是全盘皆输。其中让我印象深刻的一点是劳动参与率实际上提高了。

So part of the reason why there is higher unemployment rate is that there's increase in the supply of workers. Now, we've been talking about this for a few months now. The unemployment rate is going to take higher because we have tremendous amounts of migration even as labor demand is softening. So this is all consistent with increasing supply of labor pushing up the unemployment rate. So this is something that doesn't usually happen. So I'm not as worried about this. And if you look at the GDP now cast from the Atlanta Fed, it continues to suggest a very strong growth. But obviously, if you add millions of people a year, that's going to put upward pressure on the unemployment rate because more people are looking for jobs.

因此，失业率较高的部分原因是工人供应的增加。过去几个月我们一直在讨论这个问题。由于劳动力需求正在减弱，但移民数量却非常巨大，失业率将会上升。这一切都是因为劳动力供应的增加推动了失业率上升。这种情况并不常见，所以我并不太担心。同时，从亚特兰大联邦储备银行的GDP预测来看，经济仍然显示出很强的增长势头。但显然，如果每年增加数百万人口，失业率也会因为更多人找工作而承受上行压力。

Now, the market had a very, very strong reaction to this. So strong, in fact, I think it's kind of crazy. So after the Fed meeting on Wednesday, the market was pricing in three cuts. The market is now pricing in four cuts. A lot of people are saying the Fed has to cut by 50 basis points in September. If you look at the 10 year yield, totally imploded. So not too long ago, it was at 4.2%. Now it's comfortably below 4%. So it seems like there was a very strong reaction that, everyone is finally jumping in on this imminent recession trade, great cuts, and so forth.

现在，市场对此反应非常强烈。如此强烈，以至于我觉得这有点疯狂。在美联储周三的会议之后，市场预期将有三次降息。而现在，市场预期是四次降息。很多人说美联储必须在9月份降息50个基点。如果你看看10年期国债收益率，那简直是崩盘式下跌。不久前收益率还在4.2%，现在已经稳稳跌破4%。所以看起来市场反应非常强烈，所有人似乎都在押注即将到来的经济衰退交易、大规模降息等等。

There are even whispers of an intermediate cut. So the Fed cutting before the September meeting. And let me tell you, that is so outrageously insane that you have to be taking crazy feels to think that. Now the market, let me just remind you, in January, the market was pricing in seven cuts this year. So the market is not very smart. Market is, I don't see, kind of dumb sometimes. And it's always very eager to pricing cuts. And remember, if you've been following me for the past few years, market has been totally wrong. Interest rate market, bond market, totally wrong about transitory inflation, about higher for longer.

甚至传言说美联储可能在九月会议前进行一次中间降息。让我告诉你，这种想法简直是荒谬得令人难以置信，只有疯子才会这么想。现在让我提醒你一下，在一月份的时候，市场预期今年会有七次降息。所以市场并不聪明，有时候甚至有点蠢，而且总是急于消化降息的预期。如果你过去几年一直在关注我，你会知道市场在很多方面都是大错特错的。比如关于暂时性通胀、关于“高利率维持更长时间”，利率市场和债券市场都显得完全错误。

And I think it is totally wrong here as well. Now we had some Fed speakers come out Friday addressing the unemployment report, mega dove Austin Gossleby. Nothing in his comments suggests that we're going to have an emergency cut. Honestly, it's one data point. And some people would also point out that we had a big storm in Texas that might be impacting this. Now the bank, the BEA, the agency, doesn't, is telling you that they don't think that that had to impact. But if you look at the underlying data, it does seem to have some impact on responses.

我觉得这个看法在这里也是完全错误的。我们看到上周五有几位美联储的官员出来就失业报告发表了意见，其中包括超级鸽派的奥斯汀·古尔斯比。他的讲话中没有任何暗示我们会有紧急降息的打算。说实话，这只是一个数据点而已。有些人还指出，德州有一场大风暴，这可能对数据有影响。而银行、经济分析局等官方机构则表示，他们认为风暴没有影响数据。但如果你仔细看数据的话，似乎确实对结果有一些影响。

In any case, this is one print. And we have to watch for upcoming friends to see if this is, see if this really is a trend of weakening. A labor market is definitely weakening. But I think the unemployment part is being exaggerated by migration. And that's throwing off a lot of commentators. For all I know, and I suspect this will be the case, is that one of the things that's special this time around is that we are starting at five and a half percent interest rates. There's a lot of room to cut. And as the market prices in more cuts, I suspect that we will come, market will again come to see low rates equal higher equities. But I guess we'll figure that out in the coming weeks.

无论如何，这是一个数据点。我们需要关注接下来的数据朋友们，看看到底是不是一个疲软的趋势。劳动力市场确实在减弱，但我认为失业部分的数据被移民夸大了，这让很多评论员出现了误判。根据我的了解，我怀疑事实会如此，本次特别之处在于我们从5.5%的利率开始，有很大的降息空间。随着市场预计更多降息，我怀疑市场会再次认为低利率等于高股价。不过，我想我们会在接下来的几周内弄清楚这一点。

Again, we are only, you know, we were only in the beginning of August. And there's a lot of things that can happen between now and December at the moment I am not yet worried. All right. So that's all left prepared for today. Thanks so much for tuning in. Remember to like and subscribe. And if you're interested in hearing more about my thoughts, check out my weekly blog at fit guy dot com. All right, guys, talk to you next week.

好吧，我们现在才刚到八月初，你知道的。从现在到十二月之间，还会有很多事情发生。现在我还不担心。今天就准备这些内容吧。非常感谢你的收看。记得点赞和订阅。如果你想听我更多的想法，可以去我的网站 fit guy dot com 查看我的每周博客。好了，大家，我们下周再聊。