The past week delivered a whiplash market driven by headlines. Oil spiked, volatility surged, rate markets flirted with a hawkish repricing, and geopolitics once again pushed itself to the front of the macro conversation.
Yet stepping back from the noise, the research coming out from the Street offers a useful framework for navigating the week ahead. In summarising four of our favourite reads from this week, we note HSBC’s message is that markets have already travelled a long way in pricing fear. Bank of America thinks the supply disruption eases later this year, with Barclays’ equity derivatives desk liking an equities lower/yields higher play. As for Deutsche Bank, they still believe the current sell-off falls short of previous crisis thresholds.
None of the below should be taken as fact, but when setting up for another volatile week ahead, knowledge is power.
HSBC Says We’ve Hit “Peak-Fear”
Summary View: HSBC argues that the sharp market moves following the escalation in the Middle East likely marked a “peak fear” moment, with positioning and volatility indicators reaching levels comparable to early pandemic stress. Recent headlines, with little serious escalation, led the bank to conclude that markets had overshot to the downside and were pricing a scenario unlikely to deteriorate further.