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Research Weekly August 19, 2024
Aurelie Barthere
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Key Takeaways
3 min read
  • We admit that there might have been some exaggerations in the narrative surrounding the July-August risk sell-off: the last US payroll data have probably been impacted by temporary factors (e.g. hurricane). Last week has brought rather upbeat data on US retail sales data
  • That said, there is a clear trend of slow down in various labor market indicators, as well as in the growth of real disposable income, compared to 2023. Equity valuations remain at multi-year highs. And the crypto sell-offs of March and July have negatively impacted investors’ risk appetite
  • Our Tactical Risk indicator turned neutral last week (the average of BTC call-put spread is still risk-on but BTC price momentum risk-off since August 14th)
  • To us, this warrants a nimble approach to Risk allocation (trimming allocation at the margin) and taking advantage of Crypto sell-offs, or changes of narratives to re-allocate (e.g., Trump regaining its lead over Harris in the US presidential election polls or better data on the US labor market)

Market Views

The panic selling that took hold of markets at the end of July is subsiding: the VIX is back below 15, and the Nasdaq has retraced about ⅔ of its peak-to-through fall.

Should we forget about July, dismiss it as a positioning adjustment, and keep the “eyes on the bull”?

We admit that there might have been some exaggerations in the narrative surrounding the July-August risk sell-off: the last US payroll data have probably been impacted by temporary factors (e.g. hurricane). Last week has brought rather upbeat data on US retail sales (up 3.6% 3m3m SAAR on a real-adjusted basis). That said, there is a clear trend of slow down in various labor market indicators, as well as in the growth of real disposable income, compared...