What Are Equity Markets Trading On?
I am pretty lucky these days. All day long I get a chance to talk to some sharp people on both sides of the market, both buy and sell. In my conversations the most common topic that gets batted around is, what is this market trading off of? Yesterday it really struck me while having a great chat with some of the guys at Encima Global – they are former Bear Stearns analysts headed by David Malpass. We talked about the different ways in which institutions are trying to trade this market. Encima is an economics shop and provides clients research and viewpoints, so the talk drifted to trading economic releases. So what do firms do in trading economic releases? Many things. Some institutions are in the speed game, especially when trading off of major numbers like jobless claims or unemployment; the timescale from announcement to execution is down to milliseconds these days. By trading off the headline number they are looking to beat everyone else by pre-setting trade conditions for a given
