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On Market Complacency….

Some thoughts here from Nomura’s Macro Strategy Team on recent market positioning and events. They think equity investors remain extremely complacent and the SPX could be headed for 1300:

– Key near-term risks are political; the US election, the fiscal cliff debate that follows it and the long-term outlook for US monetary policy that is dependent on the result. There is also the Spanish regional election.

– We see evidence that the market is positioned long of risk.

– The earnings season thus far has not been good and economic data in the US and Europe are, at best, mixed, relative to expectations of a Q4 rebound that we believe may be disappointed.

– The trades we like for a tactical play now are selling SPX (outright or via options), buying the USD (except against the JPY), buying US rates – 5yr outright or 10yr against swaps, and for those in the metals space we would look at buying gold at these kind of levels.

Source: Nomura Macro Strategy Team

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