Marko Kolanovic – a.k.a. “Gandalf”, a.k.a. the “half-man, half-God” – has a new note out and it’s great.
Well last month, the day before the above consensus AHE print that accompanied the January jobs report started tipping dominos, Marko suggested that the market action from the late January highs through February 1 didn’t presage an imminent systematic de-risking episode. That prediction was proven wrong the following day and once Monday February 5 rolled around and ushered in the short vol. ETP implosion, it was clear that what Marko had been warning about for years was indeed materializing.
And so, he did what one does when one is the business of trying to figure out what’s likely to happen next – he made a prediction. That prediction was pretty straightforward: the systematic unwind is behind us, buy the dip.
That didn’t go over particularly well with the doomsday crowd and to the extent Kolanovic saying “buy the dip” was a bitter pill for the permabears to swallow, that pill became increasingly bitter as the market bounced off the lows and rallied hard the following week, proving that Kolanovic was in fact right – again.
Well Marko would go on to kind of rub it in over the next three weeks.
That brings us neatly to his latest note which in many ways represents the final leg of his BTFD victory lap and he kicks it off in spectacular fashion by noting that the inflation scare narrative was “completely debunked” (he’s talking about the AHE miss and the inline CPI print) and then, he takes what certainly looks like a jab at certain “folks” with a reference to fearmongering “clickbait”. To wit, from Marko:
With the inflation scare completely debunked by recent data and bond yields only at ~2.80% (and bond shorts still ‘off the charts’), our views on risks and equity upside have been confirmed by markets. Recently, financial press stories were dominated by fear. This is perhaps understandable given a long period of extremely low volatility before the recent turmoil. Negative stories also tend to attract more attention (clickbait). After running through various negative narratives – inflation, stagflation, hyper growth, rollover of growth, large deficits, tariffs to reduce trade deficits – the most recent bear narrative is trade wars (and particularly one with China). We argue below that this risk is also very low, and if we take the 2015 turmoil as a template for flows from systematic and fundamental investors, markets are likely to reach all-time highs soon.