Quant Carnage Wrecks Tech As Small Caps Soar On Financial Frenzy

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Quant Carnage Wrecks Tech As Small Caps Soar On Financial Frenzy

Market to momo-tilted quant funds today…

Chinese mega caps were unchanged overnight but small cap tech was panic-bid…

Source: Bloomberg

European banks outperformed as the broad European equity markets slumped…

Source: Bloomberg

US equities were mixed with Trannies and Small Caps (squeezing higher) but the big caps notably underperforming…

This is the biggest daily divergence between Trannies and Nasdaq since Nov 2018.

A major short-squeeze lifted stocks out of the open and beyond the EU close…

Source: Bloomberg

Financials notably outperformed on the day (helping to lift Small Caps too)…

Source: Bloomberg

Notably diverging from the yield curve…

Source: Bloomberg

But, quietly under the surface, there was utter carnage in the quant space as the massive divergence between value (lower) and momentum (higher) factors in August has been unwound dramatically fast…

Source: Bloomberg

It seems August’s great month for momo was so good, it’s bad, as CTAs are forced to derisk huge relative exposures…

Source: Bloomberg

NOTE – today’s crash was the largest since the quant carnage in 2009

And Value-tilts were panic-bid…

Source: Bloomberg

A massive mean-reversion today…

Source: Bloomberg

And before we move on to bonds, Nomura’s Charlie McElligott noted this would make for the worst single-day of performance in my model Equities HF L/S portfolio since February 5th / February 8th 2018’s Leveraged VIX ETN “Extinction Event”

Treasury yields were broadly higher on the day (thanks to three major selling legs – EU open, US open, US close) with the long-end underperforming…

Source: Bloomberg

30Y Yields topped 2.10% intraday, erasing a lot of the gains since Trump’s tariff tantrum…

Source: Bloomberg

The yield curve steepened notably on the day but 3m10Y remains significantly inverted…

Source: Bloomberg

Finally, before we leave bond-land, we note that last week saw the market value of negative-yielding bonds shrunk by $1.2 trillion, the biggest weekly drop on record (and it got worse today)…

Source: Bloomberg

The dollar extended recent losses today, falling to post Trump-tariff-tantrum lows…

Source: Bloomberg

Cable managed solid gains as no-deal brexit odds fell further… (but chaos remains)

Source: Bloomberg

Euro rallied on the day, nudged higher by headlines on Germany …read more

Source:: Zerohedge.com

      

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