Nomura Quant Sees Slowing Market Rebound After Rate Hike
Derivatives cues indicate that the pace of the $S&P 500 Index(.SPX.US$ benchmark's ongoing recovery will likely slow after the Federal Reserve's rate decision later this week, according to quantitative strategist Yoshitaka Suda of Nomura Holdings.
The comparatively low volatility ahead of Wednesday's Fed meeting shows that the options market is "increasingly optimistic" about the event, Suda wrote in a note dated Oct. 31. A shift in options hedging by traders could also weigh on the market, he added.
Hopes of a dovish turn in the US central bank's monetary policy have been elevating, even as the Fed is expected to deliver a fifth-straight jumbo rate hike today.
The risk to stocks from the Fed meeting appears to be primarily on the downside, with the S&P 500's one-week implied volatility skew "in the 20th percentile for the week prior to FOMC meetings since January 2012," Suda wrote.
Source: Bloomberg
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RDK79 : Slow the rebound, now tthat's funny