Retail traders take aim elsewhere

Broader correction apparently averted

Chart of the Day

The decision by several brokers, to restrict trading in those stocks that have been trading wildly in recent days, seemed to help support the broader market yesterday, by reducing fears that key long/short funds might face margin calls. Although the Asian indices fell early on, some of the European indices recovered their earlier losses and the US indices rose. The excitement is not over yet, though, with names like GameStop and AMC partially rebounding in after-hours trading late Thursday, and - as we’ll see shortly - retail traders setting their sights on other assets including silver and the cryptos.

Macro

US GDP slowed to 5% annualized in Q4, which meant GDP was down by 1.5% from a year earlier - not a bad result given the size of the prior declines in H1. What’s more, growth in Q4 was driven by surprisingly strong investment, which is normally a good sign for the outlook.

The claims data were a bit better than expected, although still show the labor market is in a dire state.

In the eurozone, the economic sentiment remained depressed in January.

The equivalent index in Turkey has recovered far more strongly despite the hike in interest rates there in recent months - some suggest the lira could now strengthen this year, for the first time in many years.

Markets

The recovery in equities was accompanied by a decline in implied volatility, whereas implied bond market volatility picked up slightly.

That was despite very little movement in bond yields. Long-term yields barely budged, so bond investors have yet to sound the all clear on the outlook.

While there are lots of calls for higher yields this year, trends in credit in China tell a different story. The six-month credit impulse has slumped, which is often a sign that US yields will fall.

Retail traders, shuttered out of trading equities, have apparently set their sights on silver, which jumped nearly 5% yesterday while gold was little changed.

The cryptos were also getting some attention again, though there remains a big gap in the recent performance between bitcoin and ethereum.

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