Stocks’ Post-Fed Rally Risks Adding ‘Accelerant Fuel’ to Selloff
- Investors’ hedging may build up dealer short gamma: Nomura
- Options skew, VIX volatility hold above pre-summer levels
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While the stock market rallied after the long-awaited Federal Reserve rate cut last week, there’s a sense of unease accompanying the gains.
Referring to the Fed’s shift to a bigger rate cut than had been expected even a week before the meeting, Charlie McElligott, cross-asset strategist at Nomura Securities, wrote in a note that the “‘fear of left-tail’ then self-fulfills the right-tail outcome” and that it’s “pushing the market out of recession trades, instead capitulating back into soft-landing” expectations.