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Why US equities turned into "safety trade" -- aka Why we should not have freaked out

Stocks fell 4% in a few days ending last week and given the associated widening of HY spreads (leading indicator) and VIX term inversion (leading), prompted us to expect equities to fall to between 50D to 100D mavg, or 3,150.  Instead, we saw fierce 4-day rally recovering the entire loss.A few things, in our view, contributed to this vertical rise: - US growth outlook improved, while RoW weakened --> US ISM beat, but German factory data missed, and Asia visibily weakening. - A risk-off and defensive repositioning means a style tilt to Growth --> US is the large-cap growth index (57% growth) - Risk-off means seeking liquid markets --> US is a large-cap index and RoW is basically small and mid-capIn other words, the US stock market  is the safety trade when the RoW looks dodgy.  This is what we missed.  So even if credit is stressed (high yield wide) and VIX shows fear (which it is), in context of problems outside US, drives an OW into US stocks.  POINT 1: THERE IS NOT ENOUGH S&P 500 TO GO AROUND... $25T MARKET CAP VS $300T IN HOUSEHOLD LIQUID ASSETSThe S&P 500 is about $25T in market cap and there is $300T of global household liquid assets.  Not counting Central Banks and not counting Corporate Cash. - There is just not enough S&P 500 to go around.  T...

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