DC Lite #363

"While a substantial portion of shorts have covered there is still a lot more left"

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Daily Chartbook
May 14, 2025

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1. Profits vs. employment. "Firms have avoided the extreme profit squeeze that would have ensued under the original Tariff day announcements, but some degree of squeeze will come through nonetheless and that points to slowing employment growth."

2. Credit spreads. "During a huge risk-on advance, US High yield spreads have tightened 152 bps since April 7. With spreads now at 309 bps above Treasuries, credit market investors are back to pricing in a very optimistic outlook with no recession and few defaults."

3. Leveraged ETFs. "The leveraged ETF space is back above $100B."

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4. Hedge fund exposure. "While a substantial portion of shorts have covered there is still a lot more left."

5. Theme performance. "Many risky themes, which suffered losses of as much as 60% since the S&P 500 peaked in February, are back in favor."

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ICYMI

DC Lite #362

Citi's Earnings Revisions Index turned positive for the first time in 6 months

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"S&P 500 earnings sentiment has improved sharply"

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