Nothing is more amusing than reading the smartest guys in the room as their theses fall apart. JPM leads us off:
The market sell-off that escalated overnight we believe is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks. However, our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip. We remain constructive on risk assets and last week upgraded our S&P 500 price target, given expectations of a reacceleration in activity as the delta wave fades and better than expected earnings. Risks are well-flagged and priced in, with stock multiples back at post-pandemic lows for many reopening/recovery exposures; we look for Cyclicals to resume leadership as delta inflects. We remain OW Japan equities on tailwinds from political changes and a cyclical upswing, and favor EM equities given valuations and healthier macro fundamentals. We stay short US duration given still rich valuations and the prospect of a hawkish Fed. DM Credit fundamentals continue to improve and are supportive of tight spreads, but we revised our default forecast higher in EM Asia. In Commodities, we remain bullish on Oil with the market in deficit, but are bearish on Gold on expectations of higher yields.
That’s the diametric opposite of my view. China risks are underpriced in equities, yields and, in particular, commodities and EMs. BofA is almost as bad:
