Wall Street has started to look beyond life after COVID-19 and massive stimulus. The Friday aftermath with Archegos Capital’s massive margin calls that led to the liquidation of over USD20 billion in stocks won’t be immediate. With the S&P 500 index only down modestly, the damage appears to be contained. Credit Suisse and Nomura are down over 13% after warning over potentially significant losses, while Goldman Sachs is down a few percentage points over losses that are being reported as likely immaterial. Morgan Stanley has been quiet, while some traders believe they were probably in the same position as Goldman Sachs and likely.
It does seem like the Friday beatdown for Viacom CBS, Discovery, and many Chinese tech stocks is a one-off event. Undoubtedly the over-leveraging done by Archegos Capital Management, run by former Tiger Asia manager Bill Hwang, will force every prime brokerage to review their books. When you look at the stocks that were incorrectly bet on, Wall Street must ponder if the V-shaped stock market recovery got out of hand.
A US-based hedge fund defaulted on margin calls and while the reopening of the economy trade will continue, the path higher for US stocks will be complicated and filled with fresh risks. US stocks will likely finish the year much higher, but markets will remain on edge as hedge scrutiny will intensify.
Bitcoin
Bitcoin is surging after Visa signaled they will become the first major payments network to settle transactions in USD coin (USDC). Surprisingly, Ethereum is not outperforming Bitcoin as Visa will use a dollar-based stablecoin over Ethereum’s blockchain. The world is going crypto and a couple more Wall Street giant endorsements should be what is needed to take prices toward USD75,000 over the next couple of months.
Colombia
Colombia’s central bank unanimously voted to keep rates steady at 1.75%, ending a string of decisions that had a minority call for more stimulus. The Friday policy decision was the first for both co-directors Mauricio Villamizar and Bibiana Taboada. Inflation is still too low, the lowest since the 1950s and the fear is that additional rate cuts could trigger a mass exodus of foreign capital. The situation in Colombia is becoming optimistic and the central bank might remain on hold for the majority of the year.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
