The long trade is back on, but beware the VIX.

Economic calendar

Here are the important events for this week: Look out for US Jobs and GDP numbers on Thursday, and Core PCE, the Fed’s favorite gauge on inflation, on Friday.

 The Macro View

Last week saw significant inflows into equities, indicating a resurgence of the risk trade. According to Deutsche Bank, there were very strong net flows into global equity funds in the week ending September 18. This surge was primarily driven by flows into US equity funds, with a notable increase compared to the previous week (+$39bn vs -$2bn in the previous week).

Overall Positioning still neural.

On Goldman Sachs Prime Book, the overall positioning showed a slight uptick, but nothing noteworthy yet. As we have seen in the past few weeks, hedge funds have been consistent sellers and are probably still underweight. The long equities trade still has a long way to go before becoming crowded again.

Sentiment stuck in neutral

Last week, the S&P 500 reached all-time highs, but Bank of America’s bull/bear indicator has remained in the neutral zone. Many people are doubtful about this rally and are staying on the sidelines. The question on everyone’s mind is whether the market will continue to rise or if we should expect a downturn from here.

Beware the seasonality. Time for VIX.

“Keep in mind that VIX seasonality is expected to take effect now. Historically, mid-September to early October is a tough time for the stock market. Whatever you decide to do, ensure that you always manage your risk.”