The recent market downturn, characterized by plunging metal prices, software stock sell-offs, and crypto volatility, is examined with Charlie McElligott, a cross asset macro strategist at Nomura. McElligott attributes the market shift to over-leveraged and crowded positions, particularly short dollar trades, and narratives around debasement and de-dollarization. He notes that Bitcoin's failure to rally with gold and silver signaled a divergence, as Bitcoin began trading more like software stocks facing an existential crisis due to AI advancements. The rush to CapEx spending in AI is also putting pressure on credit markets, with firms taking on debt and reducing buybacks, further impacting equity demand. McElligott points out that the dominance of market-neutral multi-strategy funds contributes to lower volatility and fragmented market reactions.
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