Something strange is taking place in the market.
On one hand, the broadest market index, the S&P500, continues to levitate ever higher and on Friday it closed at a fresh 52-week high, despite the spike in Treasury yields which briefly topped 4% following Japan's latest dismal (and half-assed) attempt at FX/bond market intervention by expanding the yield at which the BOJ will step in to buy bonds from 0.50% to 1.00%, in the process sending shockwaves across trillions in global fixed income securities.
On the other hand, the picture is far less rosy if one turns not to the performance of the S&P but to some of the more popular pair trades in the market (because virtually nobody puts on a pure S&P long besides a handful of retail traders). Recall, last week we said that we are observing "Unprecedented Hedge Fund "Destruction" Sparks Massive Degrossing As Offside Exposure Hits March 2020 Crash Levels" and since then it's only gotten worse as Goldman trading desk wrote in its Friday market post-mortem note: "Fundamental LS managers have experienced 9 consecutive days of negative alpha, the longest period since Jan 2017. July is now on course to be the worst month in terms of alpha since May last year. On YTD basis managers have accumulated 2.3% of negative alpha but still up 5.4% on the back of broad market rally."
