A “ bubble ” nobody talks about: Morning Brief

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Thursday, February 25, 2021

The VIX, according to JPMorgan

Because an endless looping timeline is currently making news in financial markets these days, shares of GameStop (GME) doubled in the last hour of trading on Wednesday.

This type of action is a troubling sign to many investors: after all, the random doubling of stocks that have experienced precipitous rises and falls in the past does not exactly suggest that all is well.

And so we find there is a word on the tip of everyone’s tongue these days – bubble.

Of course, whenever stocks go up, it seems that many are quick to report or at least warn of potential bubbles.

The whole concept of a “bubble” has really become a catch-all to point to something someone doesn’t like or a perceived pricing error in the market, no matter how small.

And so it is with this second executive in mind that JPMorgan quantitative and derivatives strategist Marko Kolanovic wrote on Wednesday that “If we want to be thorough in our search for bubbles, there is another asset that is currently in a bubble – the VIX. “

“The VIX is now out of touch with the underlying short-term realized volatility of the S&P 500,” Kolanovic adds, “indicating a bubble of fear and demand from investors looking to hedge or profit from a sell-off. hypothetical market. “

Shares rebounded on Wednesday after a few choppy sessions to start the week as the Dow Jones closed at a record high. The VIX was also under heavy pressure on Wednesday, settling at 21.44 and down nearly 2 points on the day.

“Given that the VIX is at a near-record premium to actual stock volatility (~ 400-500% above ‘fair value’), we think selling the ‘VIX bubble’ is a good idea. market opportunity, ”writes Kolanovic.

Additionally, Kolanovic believes investors confuse enthusiasm in some parts of the market 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 vast stock market, where a dominant group (FANG) has barely budged for 6 months despite a massive amount of stimulus and an expected economic recovery. which have barely recouped the losses of 2020, and energy which is still down 25% from last year despite a bull market in commodities, ”writes Kolanovic.

Adding: “We see some relatively contained market segments that appear to be in a bubble related to electric vehicles (EVs), renewables and innovations. These sectors only make up a small part of the market (e.g. electric vehicles). constitute only 2% of the S&P 500), but we are seeing segments that remain cheap such as energy where positioning remains heavily underweight. We believe this is only the first round of the market rally and that the cyclical rotation could play out for next year. “

And so, while it’s hard to declare a game over when we’re only in the first round, the GameStop situation suggests that this contest could be a lot of fun.

And who doesn’t like to have fun?

By Myles abroad, journalist and presenter for Yahoo Finance Live. Follow him on @MylesUdland

What to know today

Economy

  • 8:30 am ET: Durable goods orders, January preliminary (1.1% expected, 0.5% in December)

  • 8:30 am ET: Durable goods excluding transport, January preliminary (0.7% expected, 1.1% in December)

  • 8:30 am ET: Orders for non-defense capital goods excluding aircraft, January preliminary (0.8% expected, 0.7% in December)

  • 8:30 am ET: Capital shipments excluding defense, aircraft, January preliminary (0.6% expected, 0.7% in December)

  • 8:30 am ET: Initial jobless claims, week ended February 20 (825,000 expected, 861,000 the previous week)

  • 8:30 am ET: Continuing complaints, week ended February 13 (4.460 million expected, 4.494 million the previous week)

  • 8:30 am ET: Quarter-to-quarter annualized GDP, Second estimate in Q4 (4.2% expected, 4.0% in previous print)

  • 8:30 am ET: GDP price index, Second estimate in Q4 (2.0% expected, 2.0% in previous print)

  • 8:30 am ET: Basic personal consumption expenditure, Second estimate in Q4 (1.4% expected, 1.4% in the previous print)

  • 10:00 am ET: Pending home sales, month to month, January (0.0% forecast, -0.3% in December)

  • 11:00 am ET: Kansas City Fed Manufacturing Activity, February (15 planned, 17 in January)

Earnings

Pre-marketing

  • 7:00 am ET: Wayfair (W) Expected to post adjusted earnings of 83 cents per share on $ 3.77 billion in revenue

  • 7:00 am ET: Best Buy (BBY) Expected to Report Adjusted Earnings of $ 3.47 per Share on Revenue of $ 17.24 Billion

  • 7:00 am ET: Modern (RNAm) Expected to Report Adjusted Loss of 38 cents per Share on $ 287.62 Million in Revenue

  • 7:00 am ET: Connect the power supply (PLUG) Expected to Report Adjusted Loss of 12 cents per Share on $ 88.57 Million in Revenue

  • 7:00 am ET: Norwegian Cruise Line Holdings (NCLH) Expected to Report Adjusted Loss of $ 1.67 Per Share on $ 9.38 Million Revenue

  • 7:30 am ET: Domino Pizza (DPZ) Expected to Report Adjusted Earnings of $ 3.90 Per Share on $ 1.39 Billion Revenue

  • 8:20 am ET: PG&E (PCG) Expected to Report Adjusted Earnings of 21 cents per Share on $ 4.78 Billion Revenue

Post market

  • After the market closes: Airbnb (ABNB) Expected to Report Adjusted Loss of $ 9.67 per Share on Revenue of $ 747.04 Million

  • After the market closes: DoorDash (HYPHEN) Expected to Report Adjusted Loss of 80 cents per Share on Revenue of $ 926.71 Million

  • 4:00 p.m. ET: Working day (WEDNESDAY) Expected to post adjusted earnings of 56 cents per share on $ 1.12 billion in revenue

  • 4:00 p.m. ET: Autodesk (ADSK) Expected to Report Adjusted Earnings of $ 1.07 Per Share on $ 1.01 Billion Revenue

  • 4:00 p.m. ET: WW International (WW) Expected to Report Adjusted Earnings of 35 cents per Share on Revenue of $ 316.25 Million

  • 4:00 p.m. ET: National Live Entertainment (LYV) Expected to Report Adjusted Loss of $ 2.24 per Share on $ 208.25 Million in Revenue

  • 4:05 p.m. ET: Nikola (NKLA) should report an adjusted loss of 24 cents per share with no significant income

  • 4:05 p.m. ET: Etsy (ETSY) Expected to report adjusted earnings of 66 cents per share on revenue of $ 515.64 million

  • 4:05 p.m. ET: Virgin Galactic Holdings (SPCE) is expected to report an adjusted loss of 31 cents per share on revenue of $ 633,625

  • 4:05 p.m. ET: Rocket Cos. (RKT) Expected to Report Adjusted Earnings of 88 cents per Share on $ 3.96 Billion Revenue

  • 4:05 p.m. ET: Zscaler (ZS) Expected to Report Adjusted Earnings of 8 cents per Share on $ 147.44 Million

  • 4:05 p.m. ET: HP Inc (HPQ) Expected to Report Adjusted Profit of 66 cents per Share on $ 14.97 Billion

  • 4:05 p.m. ET: Salesforce.com (CRM) Expected to Report Adjusted Earnings of 75 cents a Share on $ 5.68 Billion Revenue

  • 4:10 p.m. ET: Shake Shack (Shake) Expected to Report Adjusted Loss of 12 cents per Share on $ 157.32 Million in Revenue

  • 4:15 p.m. ET: VMWare (VMW) Expected to Report Adjusted Earnings of $ 2.05 per Share on $ 3.23 Billion Revenue

  • 4:25 p.m. ET: Dell Technologies (DELL) Expected to Report Adjusted Earnings of $ 2.14 Per Share on $ 24.52 Billion Revenue

  • 4:25 p.m. ET: Beyond Meat (BYND) Expected to Report Adjusted Loss of 14 cents per Share on $ 103.57 Million in Revenue

  • 4:30 p.m. ET: Caesars Entertainment (CZR) Expected to Report Adjusted Loss of $ 1.95 Per Share on $ 1.71 Billion Revenue

Top news

GameStop shares close 104% higher in afternoon rally up to 100% after hours [Yahoo Finance]

Europe opens higher after rally on Wall Street and Asia [Yahoo Finance UK]

Tesla temporarily halts production of Model 3 line in California: Bloomberg News [Reuters]

Highlights from Charlie Munger at the Daily Journal Annual Meeting [Yahoo Finance]

Yahoo Finance strengths

The unemployment rate for the bottom quartile of Americans is 23%

The great government gift of 2021

New Marriott CEO: ‘We are seeing green shoots’

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