Extreme pessimism, oversold markets and minimum allocation of funds are factors contributing to the rebound in the US stock market. Today, every investor in the market seems to be a macro trader.

After UK policy makers promised a new round of bond purchases to prevent a systemic collapse, the S & P 500 rose 2 per cent on Wednesday, ending a six-day decline; Goldman Sachs Group's basket of the most shorted stocks rose 4.6 per cent; traders shorting US Treasuries were also tied up, with 10-year Treasury yields tumbling more than 20 basis points.

Oil, gold and copper all rose more than 2 per cent, defeating those betting that a stronger dollar would dampen commodity gains. The largest ETF, which tracks u.s. stocks, treasury bonds, investment-grade bonds, high-yield credit and raw materials, rose 12% on Wednesday, the strongest gain since April 2020.

Rising correlation has become a scourge for bulls and bears, with sharp falls in cross-assets hitting potential market speculators and a sharp rebound wiping out those betting on more pain. As volatility indicators rise and the market is dominated by headlines, life is getting harder and harder for anyone who relies on bottom-up fundamentals to invest in US stocks.

Andrew Lekas, head of trading at Old Mission Capital FICC, said:

The market got the needed vote of confidence from the Bank of England. No quantitative model can foresee this coming, so adjustments after such events will naturally push the S & P 500 higher. "

The Bank of England's latest move sparks debate on the path of raising interest rates in the future

It is understood that Wachovia officials threatened to control inflation at the expense of economic growth, resulting in billions of dollars in losses in the stock and bond markets. They then announced historic policy measures that would accelerate synchronized volatility between S & P 500 stocks and various types of assets. And now, the simultaneous rise in stock markets on Wednesday is in sharp contrast to a few days ago, when financial markets were unnerved by central banks around the world tightening monetary policy.

The blow was particularly severe for investors in UK assets. The pound is up more than 3% from Wednesday's low after the Bank of England rescue plan, which could be a headache for short sellers such as BlueBay Asset Management LLP. It is understood that BlueBay Asset Management recently took advantage of the collapse of the pound to reach an all-time high. Meanwhile,The yield on 30-year gilts fell the most on record, unsettling bears after two days of the biggest gains in history.

Huw Roberts, head of analysis at Quant Insight, a London-based research firm, said the main drivers were inflation and tighter monetary policy by central banks to fight inflation. It is understood that the agency is committed to studying the relationship between assets and macro factors.

With everything in step, unprecedented two-day volatility is likely to spread to other markets, where consistent volatility depends almost entirely on the market's perception that policy tightening will lead to a global recession. Last month, a measure of cross-asset correlation at Barclays jumped to one of the highest levels in the past 17 years.

Piper Sandler & Co. Roberto Perli, head of global policy research, said:

"based on US and other global government bond yields, gilt yields may temporarily ease some upward pressure, but in the long run they will continue to be driven by sharp interest rate hikes by central banks."

Although the Bank of England's latest move has sparked a debate about its future path to raise interest rates and whether the Fed will do the same during the financial crisis, but for bears who have returned to the market over the past decade because the central bank's actions are on the verge of extinctionThe desire to save the market is a nightmare.

The market is still pessimistic about the economic outlook

Fund managers have cut their equity exposure to record lows and their cash holdings to record highs because of recession fears, according to Bank of America Corporation's latest survey.

In addition, the net leverage ratio among hedge funds was 38 per cent last week, down slightly from a more than 10-year low of 35 per cent in June, according to Morgan Stanley's prime broker. It is reported that the net leverage ratio is an indicator of the group's risk appetite for long and short positions.

As a result, the defensive position laid the foundation for Wednesday's rebound. Throughout 2022, however, bargain buying proved to be a futile strategy, and every rally in the bond and stock markets was subsequently thwarted. In fact, a Bloomberg model that tracks a portfolio of 60% stocks and 40% fixed-income securities is down 20%, heading for its worst year since the 2008 financial crisis.

Chris Weston, research director of Pepperstone Group Co., Ltd., said:

There are some incredible twists and turns in the news flow. The announcements and policy changes of the Bank of England and the Truss government are very unstable and seem to have been made in a hurry. "