Let me kick this off by saying that on Friday evening, I delivered a sweeping assessment of what I firmly believe was rampant fearmongering following the Wednesday/Thursday drawdown in U.S. equities (SPY).
That post, entitled "Reality Versus Market Agitprop: Did Everyone Really Turn Bearish On Wednesday?", was basically an opinion piece prompted by a series of reader e-mails I received as feedback on my own site.
On Saturday morning, I decided to pen a fact-based, straightforward take on the same theme for this platform. This is to be distinguished from the more impassioned, freewheeling piece linked above, but should nevertheless be seen as a kind of addendum to it.
Obviously, what happened on Wednesday and Thursday was at least in part attributable to technical flows and other forms of systematic, forced de-risking.
On Friday afternoon, the recognized authority on these matters, JPMorgan's Marko Kolanovic, weighed in on the selloff, and in the absence of a compelling reason to think otherwise, his take should probably be viewed as the definitive assessment. Here is a quick excerpt from Marko's note that explains what happened:
Wednesday’s selloff was largely technical in nature, with systematic strategies following the same selling template as in the Feb 5th selloff. Fundamental fears this time were about rising yields and the Fed’s more hawkish stance. In terms of systematic strategies that drove the selloff – by far the biggest selling pressure was from option gamma hedging on Wednesday.
What you should note about this is that some of it isn't debatable. There's math behind these assessments of systematic selling pressure, so while smart people can argue about "how much" and "who" (where "who" just means which systematic strats were primarily responsible for accelerating the declines), explanations that don't reference these flows are incomplete. Period.
There's some debate about
