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Big Week Ahead: Earnings, GDP, Fed Interest Rate Decision

The following is an amended form of the July 25 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

We are staring at a three-headed beast this week: Earnings, the Federal Reserve’s interest rate decision, and economic data.

Three-headed beast. Promo image for the original Showa iteration of King Ghidorah. Source: Toho Co via Wiki
Promo image for the original Showa iteration of King Ghidorah.
Source: Toho Co via Wiki

The Fed interest rate decision is Wednesday. Second-quarter GDP is Thursday. The most important economic data release isn’t until Friday with the Personal Consumption Expenditures, aka the Fed’s preferred inflation gauge.

The FOMC and Q2 GDP will get the lion’s share of attention. Both could turn out to be non-events. GDP is a trailing indicator and anyway this is just the first estimate of Q2 GDP. Yeah if it prints negative that will be two consecutive quarters, which technically means we were/are in recession, blah blah. Doesn’t change the fact that this tells us something which has already happened. As such it is unlikely to move markets very much.

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Watch for the Bounce in Equities: Brent Kochuba, Spot Gamma (Szn 4, Ep 7)

Brent Kochuba of Spot Gamma joins the podcast to discuss his view that there will likely be an equities rally into the March 18 options expiration.

This podcast was recorded Wednesday afternoon, March 9, 2022, and made available to premium subscribers that same day. Become a premium subscriber today by visiting Contrarian.Supercast.com or our Substack. There are many benefits beyond getting podcasts a few days (or more) early and not having to deal with annoying ads or announcements.

Content Highlights

  • Stocks have been selling off with the Nasdaq now officially in a bear market. But the guest is short-term bullish for reasons that can be traced to market makers hedging counterparty risk (2:39);
  • What about all the uncertainty with Russia-Ukraine? (5:57);
  • Stocks are up since the start of the Russian invasion on Feb. 24, likely because markets were hedged going in due to Fed tightening concerns (9:28);
  • What to make of the March 9 rally? A brief primer on gamma, vanna, and charm aka delta decay (11:02);
  • Similar gamma squeezes caused rallies in the past around options expiry (15:20);
  • Background on the guest (21:31);
  • The hedges investors have put on ahead of the FOMC meeting next week should lead to more risk-off. The lower bound for the S&P 500 is 4,100 (24:36);
  • Recent days have seen a change in options flow: Nvidia (NVDA) and crypto names such as Coinbase (COIN) have benefited along with Amazon (AMZN) and the Financial Select Sector SPDR ETF (XLF) (26:50);
  • Liquidity is important and recent months have seen some of it leave the system (30:06).

More Information on the Guest

Video Highlights

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