rates -0.3sd, growth -0.5sd this week; growth -0.5sd is 0.21sd short of the 0.75sd band, the nearer of the two; 13-week trend: stagflation fear (rates +1.3sd, growth -0.8sd per quarter); 2s10s flattened 23bp over the month
Leading now
Health (sector)new+0.9
Cybersecurityreversal+3.8
Refiners4th wk up+2.1
driver confirms
Crude tankers *3rd wk up+1.6
driver confirms
Life science tools3 of last 4 wks up+2.3
Look at
Cybersecurityreversal+3.8
Refiners4th wk up+2.1
driver confirms
Life science tools3 of last 4 wks up+2.3
Driver moved first: Homebuilders (30y mortgage rate +3.2sd, basket flat); Title and mortgage insurance (30y mortgage rate +3.2sd, basket flat); Agricultural inputs (DBA -2.5sd, basket flat)
Move out of
Industrials (sector)5th wk down-0.8
Real estate (sector)4th wk down-1.0
Natural gas producers2nd wk down-2.9
driver contradicts
Managed carenew-2.6
crowded short
Quick service restaurants2nd wk down-2.1
XLY vol down
Oil & Gas Exploration & Production (GICS)2 of last 4 wks down-2.4
institutions cut last quarter
Look at = up this week, members agreeing beyond chance, and 2 weeks running or a move over 2.0sd. Move out of = same rules, downward. Mechanical ranking of residual moves, checked by the backtest, not a forecast. Tags: driver = the basket's real-world series moved with it (confirms) or against it; shorts and institutions from FINRA and 13F, against the universe; vol = parent sector implied vol on the week. Backtest 2023-04-07 to 2026-09-04, look-at minus move-out-of vs sector: 1 week +0.52% (t 1.83, 166 wks), 4 weeks +0.64% (t 0.85). Positive but not significant at 4 weeks: a screen with a weak one-week edge, not a signal. sd = size of the move vs a normal week for that series; under 0.75 is no move, 2 is big.
The view
The market leaned toward stagflation fear without committing. Driven by crude, this week's core CPI print. Cyclicals underperformed defensives (-0.5sd). The hard data pointed the other way, so the market is trading ahead of the prints.
What rose was long-duration and fee-sensitive, with nothing clearly falling against it. Refiners up while gas producers fell points to crack spreads, not the energy complex.
The most unusual move is Cybersecurity at +3.8sd with 100% of members up. Its parent sector has no implied-vol reading, so the options market says nothing about this one either way. Across the sectors, options on consumer staples are priced as if it will swing 17% a year while it has actually been swinging 8%, the largest overpayment of the eleven. 3 sub-industries moved broadly with no hand basket over them, the largest Oil & Gas Exploration & Production at -2.4sd, so the hand taxonomy could not see it. What decides next week: whether cyclicals against defensives clears the deadband.
Rotation quadrant
undecided
rates -0.3sd · growth -0.5sd
Neither axis moved enough to name a regime, so there is nothing to call yet. Growth came closer than rates (-0.5sd) and needed to be about 39% bigger to count. Over the last 13 weeks the drift has been towards stagflation fear, which is what to read this week against.
Big dot = this week, small = prior weeks. Right = 10y up, up = cyclicals beat defensives. Grey cross = no real move.
XLK+0.4
XLC-0.7
XLY-0.7
XLF-1.4
XLI-0.8
XLB-0.9
XLE-0.5
XLV+0.9
XLP-0.5
XLU-1.3
XLRE-1.0
Sectors: each ETF’s week vs its own normal week.
Rates and curve
6 moved
3 up, 3 down of 12, about 5 by chance
More rates series moved than chance explains: 6 of 12 against about 5 in a quiet week, 3 up and 3 down. The biggest was 3m bill (+1.7sd).
nowa month agoa year ago
Yields by maturity, today vs a month and a year ago.
3m bill+5bp+1.7
2s10s-8bp-1.5
5y breakeven-9bp-1.5
5y TIPS real+8bp+1.1
-3sd0+3sd
Bars: this week’s move vs a normal week for that series; grey band = noise.
Credit, liquidity, risk
11 moved
5 up, 6 down of 23, about 10 by chance
More credit and liquidity series moved than chance explains: 11 of 23 against about 10 in a quiet week, 5 up and 6 down. The biggest was SOFR (+5.2sd).
SOFR+23bp+5.2
Interest on reserves+25bp+4.2
Effective fed funds+25bp+4.2
Copper- #1, managed money-20.75%-3.4
Overnight RRP-4.7bn-2.1
Brent+10.79%+1.4
VIX / VIX3M-4.66%-0.9
Oil vol (OVX)-11.56%-0.9
-3sd0+3sd
Positioning: nothing crowded against its 3-year range.
Spreads, Fed plumbing, vol, dollar, oil, futures positioning. Right = wider, bigger or higher this week. Crowded = where speculators already sit, from CFTC.
Themes
15 moved
8 up, 7 down of 82, about 11 by chance
More baskets moved than chance explains: 15 of 82 against about 11 in a quiet week, 8 up and 7 down. 5 of them were carried by a couple of names rather than the whole group, so they are not really themes.
Baskets on one idea, after stripping out market and sector. % = members moving the same way; higher = more believable. ✓ ✗ = its real-world driver moved with or against it. (GICS) = mechanical sub-industry basket, not hand-picked. * = members did not agree beyond chance, so not read as a theme.
Discovery
all known
2 groups found
2 groups of stocks moved together and you already have a basket for every one of them (Natural gas producers, Life science tools), so nothing new was found.
Stocks that moved together this week, found without the basket list. Thin bar = how tightly; short = probably noise.
Options market
calm
VIX/VIX3M 0.81 (-0.9sd vs 3y); SKEW 148 (+0.3sd)
One month of protection on the S&P is unusually cheap against three months, which is the shape of a market expecting nothing soon (ratio 0.81). Options on consumer staples are priced as if the sector will swing 17% a year while it has actually been swinging 8%, the largest overpayment of the sectors here. Only 3 weeks of this sector data is stored, so the levels are readable but there is nothing to compare them against yet.
sector
IV
wk
realised
gap
Consumer staples
17
8
+8
Industrials
20
13
+8
Energy
27
21
+6
Financials
16
11
+5
Materials
19
15
+4
Technology
28
24
+4
Front VIX over 3-month VIX: above 1 = stress is now. SKEW high = the tail is already hedged. Per sector: implied vol a month out, its change this week, realised vol last month, and the gap. Biggest gap = where options are most worried relative to what price did.
Positioning by basket
6 moved and tagged
universe shorts +3.9% on the last print; 13F holders +2.0% last quarter
6 baskets that moved this week carry a positioning tag, but none of them is crowded enough to change how you read the move. How current this is: the short-interest column counts bets placed as of 31 August, about 3 weeks ago. The 13F column is older still, 30 June, about 3 months ago, so “institutions added last quarter” means more funds held these names at that date. It says nothing about what anyone did during this move.
basket
wk
DTC z
shorts31 Aug
13F30 Jun
read
Managed care
-2.6
+2.2
-3%
+1%
crowded short
Oil & Gas Exploration & Production (GICS)
-2.4
+0.5
-2%
-3%
institutions cut last quarter
Drug distribution and pharmacy
-2.0
+1.1
+4%
-2%
institutions cut last quarter
Health Care Equipment (GICS)
+2.0
+0.9
+3%
-3%
institutions cut last quarter
Systems Software (GICS)
+1.6
-0.1
-2%
+4%
institutions added last quarter
Aerospace aftermarket
-1.6
+0.3
+6%
shorts adding
Insurance brokers
+1.4
+3.0
-4%
-2%
crowded short, shorts covering, institutions cut last quarter
Per basket, median of members. DTC z = days-to-cover against each name's own 3 years (over +1.5 = crowded short). Shorts = change in short shares on the last FINRA print minus the universe. 13F = change in institutional holder count last quarter minus the universe. Slower prints than price; context, not triggers.
Blind spots
3 uncovered
27 sub-industry baskets beside 55 hand baskets
3 sub-industries moved as a group this week and none of your 55 baskets covers them, so you had no way to see them.
Every S&P 500 name grouped by its GICS sub-industry, scored like a hand basket. Listed: sub-industries that moved broadly this week with no hand basket covering them, so the taxonomy missed them. Disagree = a hand basket and its sub-industry cousin moved opposite ways.