Deutsche Bank: “The Probability Of A Negative Shock Is High”

Sunday, March 19, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Mar 19, 2017

For the second week in a row, Deutsche Bank’s strategist Parag Thatte has a somewhat conflicted message for the bank’s clients: on one hand, he writes that positive economic surprises continue “but are getting less so”, and although the divergence between hard data surprises and sentiment is diminishing the bank is somewhat confident that a “pullback in the very near term is unlikely” (here DB disagrees with Goldman Sachs). However, Thatte is increasingly hedging, and notes that because a “rally without a 3-5% sell-off that is typical every 2-3 months is now running over 4 months and is in the top 10% of such rallies by duration”, he cautions that “the probability of seeing a negative shock is high” especially since Q1 buyback blackout period has begun.

Here are the key observations from the Deutsche Bank strategist:

The equity market rally has been going uninterrupted for a long time, driven by the unusual resurgence of positive data surprises. Strong data surprises drove equity inflows and fund positioning, adding to the steady support from buybacks. An expectation that positive data surprises were likely to persist underpinned DB’s call 2 weeks ago that a pullback was unlikely in the very near term. The bank takes stock of the current situation below:
Duration of rally now in top 10%. The rally without a 3-5% sell-off that is typical every 2-3 months is now running over 4 months and is in the top 10% of such rallies by duration.

The Rest…HERE

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