Bottom-line: 메리 데일리는 경제지표들이 도움을 주고 있지 않지만, 최종 정책금리가 다가 올 수록 한 번에 인상하는 금리 폭을 50bp 혹은 25bp로 낮춰야 한다고 생각함. 또한 시장 참여자들도 75bp 금리인상이 끊임없이 연속 될 것이라 단정짓지 말것을 권고함.

Federal Reserve Bank of San Francisco President Mary Daly said that policymakers should start planning for a reduction in the size of interest-rate increases, though it’s not yet time to “step down” from large hikes. “It should at least be something we’re considering at this point, but the data haven’t been cooperating,” Daly said Friday in a fireside chat hosted by the University of California Berkeley. At the November meeting, “we might find ourselves, and the markets have certainly priced this in, with another 75 basis-point increase, but I would really recommend people don’t take that away as, it’s 75 forever.”. A slowdown to more incremental increases of 50 or 25 basis points will be appropriate as the Fed’s benchmark rate gets closer to its terminal level for this hiking cycle, Daly said.

Bottom-line: 비트코인의 가격 움직임이 S&P 500 지수 및 나스닥 100 지수와 각각 0.69, 0.72의 상관관계를 가지고 있지만, 이는 몇개월 전까지 거의 똑같은 자산같이 움직이던 때보다 낮아지는 추세에 있음. 반면 8월까지 0의 상관관계를 가지던 금과 현재 0.50의 상관관계까지 가파르게 높아짐. 뱅크 오브 아메리카는 거시경제 환경이 불확실하고 시장의 저점을 향한 하락이 남았단 생각이 투자자들로 하여금 비트코인을 다시 안전자산처럼 여기도록 어떤 변화의 과정에 있지 않나 추정함.

Bitcoin’s movements in relation to other assets may indicate that investors see it becoming a haven again, after a stretch where it’s traded basically as a risk asset, according to Bank of America Corp. The largest cryptocurrency has a 40-day correlation with gold of about 0.50, up from around zero in mid-August. While the correlations are higher with the S&P 500, at 0.69, and Nasdaq 100 at 0.72, they’ve flattened out and are below record levels from a few months ago. BofA digital strategists Alkesh Shah and Andrew Moss see that as a sign that things could be changing. “A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” the strategists wrote.

Docent: 얼마전 중앙은행에서 2020년의 보고서 수정본을 발간하면서 물가안정과 자연실업률 상태에 놓이는 중립금리(r*) 외에 금융시장이 안정될 수 있는 상태의 중립금리(r**)를 제시했음. 이 기사는 파이낸셜 타임즈 내용이며, 꽤나 명쾌한 추론을 하고 있기에 도슨트가 되어 소개코자 함. 물가안정과 자연실업률을 향하는 중립금리(r*)는 현재 우리가 목도하는 것처럼 너무나 멀리 있음. 높은 인플레이션을 통제하기 위한 금리인상 속에 미국 중앙은행은 고통과 비용이 따를 것이라 단언하며, 영국 중앙은행 또한 금리인상을 망설이지 않을 것이라 발언했고, 유럽 중앙은행 또한 우리가 지금 해야 할 일을 계속 할 것이라 함. 이 모든 것은 거시경제 안정(완전고용과 물가안정)을 위한 것임. 하지만 때때로 이 금리를 향해 가다보면 은행이 벽에 부딪힐 때가 있을 것임. 자본시장의 토대가 되는 금융기관들조차 흔들리는 금융 안정성 문제가 부각 될 수 있다는 것임. 하지만 뱅크 오브 아메리카가 5%, 래리 서머스가 6%의 실업률을 제안한 것처럼 중립금리(r*)에서는 이를 어찌할 방도가 없음. 그러므로 서로 다른 작동 원리를 가지는 금리가 필요하게 됨. 그것이 바로 금융 안정성을 위한 중립금리(r**)임. 과거 앨런 그린스펀의 풋 옵션(금리인하)은 이러한 금융시장 안정성(LTCM)과 연관이 있었다는 것도 지목하고 있음. 금융시장은 금리인하를 원하고 있음. 또 다른 중립금리(r**)를 제시함에 따라 시장 참여자들은 완전고용이나 물가안정과 관련 된 중립금리(r*)는 잊어버릴 수도 있을 것임. 브라보! 이 문서는 금융 불안정성의 역할이 무엇인지 정확히 설명했음.

Four economists from the New York Fed have recently released a revised version of a 2020 paper ennoscriptd The Financial (In)Stability Real Interest Rate, R**. And what, pray tell, is r-star-star? Again, easy. If r-star is the natural real rate of interest associated with macroeconomic stability (caveat emptor), then r-star-star is the rate associated with financial stability. Cool. You can watch the paper being presented at a recent Fed event here. It’s engrossing. Spoiler alert though. There’s a major catch. Both conceptually and observationally r** differs from the “natural real interest rate” and from the observed real interest rate reflecting a tension in terms of macroeconomic stabilization versus financial stability objectives. Great. Financial stability ≠ macroeconomic stability. R-star ≠ r-star-star. Moreover, the two part ways just when it matters most — a financial crisis (basically, whenever banking hits the wall). We’re already seeing this tension play out. To choke inflation, American business leaders expect the Fed to spank labour. Bank of America expects a 5.5 per cent unemployment rate. Frankly, as Larry Summers has suggested, over 6 per cent wouldn’t be weird. So, the price mechanism and households (occasionally) need different interest rates. Full employment and price stability are (occasionally) at odds. Financial instability, meanwhile, will happily challenge both. Basically, there are conditions under which the dual mandate (alias: internal equilibrium) must take a back seat to capital markets (alias: global equilibrium). As per the paper: . . . “Greenspan’s put” . . . has been a feature of all financial stress episodes in the US [since the 1970s], with the only exception being the later part of the Great Financial Crisis . . . [in] general we note that financial stress episodes are associated with periods in which the real interest rate is above our measure of r**. Translation: financial markets want their policy cut. Otherwise, they’re gonna pay you a little visit. And when they do, you can forget whatever fed funds rate you think is appropriate for full employment and/or price stability. Bravo to the NY Fed. This paper has, in all fairness, explained exactly what it is that financial instability does.

wow... 2k, 🙇🏻‍♂️

Bottom-line: 시진핑이 뚜렷한 후계자를 지정하지 않은채 권력을 연임한 뒤, 14억 중국인들을 위해 경제를 더욱 개방하고 세계와 연결고리를 유지하겠다고 했으며, 경제성장률 데이터까지 예상을 상회했지만 위안화나 증시는 약세를 지속하고 있음. 전문가들은 이번에 집권하면서 시진핑을 보필할 인력들이 그 동안 일관되게 권력에 무조건적으로 동의하며 시진핑의 편에 서 있었다는 점을 위험으로 들고 있음. 그들은 어떠한 경우에도 시진핑의 결정에 도전하지 않을 것이며, 그 누구도 틀렸다고 말하지 않을 것이기 때문임.

Minutes after pulling off a power play that stunned even seasoned China experts, a smiling Xi Jinping gave an optimistic outlook for the years ahead. Noting how the Communist Party brought China fast economic growth and social stability over the past 40 years, Xi vowed to further open the world’s second-biggest economy and stay connected with the rest of the globe. The party would align its priorities with the nation’s 1.4 billion people, he said, and continue working hard to give them “a better life.”. “Its strong fundamentals will not change,” Xi said on Sunday to conclude a twice-a-decade reshuffle of top party leaders, referring to China’s economy. “And it will remain on the positive trajectory over the long run.”. By stacking China’s most powerful bodies with his allies, Xi has ensured he’ll be around to see those pledges through -- possibly for at least another decade after he appointed no obvious potential successors. Yet rather than cheering the stability offered by the 69-year-old leader, who is currently 10 years younger than US President Joe Biden, many China watchers are worried that nobody will tell Xi when he’s wrong. “These are all officials who got to the highest level of power by agreeing with Xi Jinping on everything and by siding with him consistently,” said Victor Shih, associate professor of political science at the University of California, San Diego. “They will not start to challenge his decisions regardless of the merits of these decisions.”. China’s yuan and the country’s stocks tumbled in Hong Kong to the lowest level since the depths of the 2008 global financial crisis even as economic growth data beat estimates. The onshore yuan depreciated as much as 0.4% on Monday, while the Hang Seng China Enterprises Index, a gauge of Chinese stocks listed in Hong Kong, plunged more than 5%.

Bottom-line: 알리바바 및 텐센트를 포함하는 대형 기술주 위주의 지수가 시진핑의 독점적 권력이 확정되며 떠나는 투자자들로 인해 큰 폭의 매도세를 보임. 이 지수의 최고점 대비 낙폭은 -74%로 20년 전 미국의 기술주 거품에 따른 나스닥 지수 낙폭인 -78%에 근접. 하지만 분석가들은 바닥을 논하기엔 아직 이르다 함. 이는 시진핑 권력 하에서 그간 기업 뿐만 아니라 민간 기업이 어려운 환경의 사업을 영위했기 때문임.

After another day of epic selling, the rout in Chinese technology stocks is rivaling the selloff during the bursting of the US dot-com bubble two decades ago, with analysts saying it’s too soon to call a bottom. The Hang Seng Tech Index, which tracks shares of internet giants including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., slumped almost 10% Monday as investors fled the market in response to President Xi Jinping’s tightening control in China. That took the gauge’s plunge from its February 2021 peak to 74%, nearing the Nasdaq Composite Index’s more than yearlong slump of 78% through October 2002. The selloff suggests investors have little hopes of a revival in private enterprise under China’s new leadership, which is stacked with Xi’s allies. The past decade under his reign saw a crackdown to curb the outsized influence of tech giants. “A lot of bad news have been baked in and the market correction is clearly overshooting, but we’re still looking for an inflection point which is unclear for now,” said Xiadong Bao, fund manager at Edmond de Rothschild Asset Management in Paris.

Bottom-line: 미국 주가지수의 성장동력을 대변하는 5개의 대형주(애플, 마이크로소프트, 구글, 아마존, 페이스북)가 이번 주 실적을 발표함. 지난 2년 간 꾸준히 두자릿수 성장을 기록했지만, 이번 분기에는 전년 동기 대비 -22% 역성장을 하면서 3개 분기 연속 역성장을 기록할 것으로 예상됨. 이들 5개 대형주가 주가하락으로 3조 달러 가량의 시가총액을 잃고 지수 내 비중이 줄었지만, 여전히 지수의 20% 수준을 차지하고 있음. 뿐만 아니라 전문가들의 추정은 내년에 다시 성장을 할 수 있을 것으로 예상되고 있기 때문에 만일 실적의 부진이 확인될 경우 마침내 최종 항복에 이를 수 있다고 함.

Once the key growth engines for the S&P 500 Index, megacap technology stocks are slated to enter this earnings season with diminished stature: profits are expected to fall by the most in at least three years. That’s a prospect that should frighten investors hoping for an end to this year’s bear market. The five biggest firms by revenue among this cohort -- Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. -- are mired in a profit slump, with earnings per share projected to fall 22% from the same quarter of 2021, data compiled by Bloomberg show. After losing roughly $3 trillion in market value combined this year amid slowing economic growth and surging interest rates, the group’s weighting is around the lowest in more than two years. But it still accounts for about a fifth of the benchmark -- more than the utilities, energy and consumer sectors combined. That makes the tech giants as important as ever for the direction of the S&P 500. And with Wall Street analysts projecting that megacap tech profits will rebound in the year ahead, any signs of weakness in their forecasts means trouble for the broader market, according to Gina Martin Adams, chief equity strategist at Bloomberg Intelligence. “The consensus still expects a relatively rapid recovery in fundamentals to emerge next year,” she said. “If the companies can’t confirm this forecast, this important segment of the S&P 500 may finally capitulate." Investors are on alert, she said, after Tesla Inc. Chief Executive Officer Elon Musk said last week that demand has been affected by downturns in China and Europe. Microsoft and Alphabet will be the first to report, on Tuesday after markets close. Meta Platforms follows Wednesday and Apple and Amazon on Thursday. The group is poised for the third consecutive quarter of falling profits, a stark contrast from the past two years, when the quintet consistently posted solid double-digit growth.

Docent: 파월 의장은 어떤 사람으로 기억되길 바라는가? 이에 대해 도슨트 역할을 하고자 함. 그에게는 폴 볼커, 그리고 아서 번스의 선택지가 존재함. 폴 볼커는 해야 할 일을 지체없이 했고, 아서 번스는 망설였고, 결국 실패했음. 물가가 여전히 높고, 자연 실업률 도달을 위한 것보다 세배나 많은 고용이 일어나고, 여전히 일자리에 인력이 채워지지 않고 있음. 이런 점만 본다면 중앙은행은 이전에 책정한 정책금리보다 더 높은 수준을 설정해야 함. 그럼에도 불구 최근 발언을 보면 중앙은행은 ‘더 높게’ 보다 ‘더 오래’를 선택하려는 모습을 보이며 적어도 지금은 아서 번스의 실패를 따를 것 같음. 금리를 계속 높이는 것보다 현재 제시 된 경로의 최종금리를 오래 유지하면 경착륙 확률을 줄이고 통화정책의 효과를 보다 잘 관찰할 수 있지만, 공짜 점심은 없음. 더 높은 금리만이 억제할 수 있는 영역과 그 시간을 놓치면, 이후 더 강하게 금리를 또 다시 올려야 하기 때문임. 파월은 누구로 기억되고 싶은 것일까?

US Federal Reserve Chair Jerome Powell faces a crucial choice as the central bank battles the worst bout of inflation since the 1970s: What kind of chair will he be? A Paul Volcker, who took interest rates ever higher in an uncompromising effort to get prices under control? Or an Arthur Burns, who acted more timidly, in the ultimately futile hope that a less austere approach might be sufficient to do the job? So far, he’s looking more like the latter. To date, the Fed’s monetary tightening hasn’t done much to reduce inflationary pressures or loosen the labor market. As of September, the median consumer price index was up 7.0% from a year earlier, compared with 6.7% in August. Payrolls expanded by 263,000 in September, roughly triple the pace consistent with a stable unemployment rate. The ratio of unfilled jobs to unemployed workers stood at 1.7 in August, far exceeding the 1-to-1 ratio that Powell has cited as appropriate. None of this is consistent with even stable, let alone declining, inflation. Given the lack of progress, one might expect the Fed to take interest rates even higher than previously planned. Yet officials’ recent remarks suggest they’re sticking to their September projections, which foresee rates increasing 75 basis points in November, 50 in December and 25 in January to a peak of 4.50% to 4.75%. In other words, they intend to take rates to a moderately restrictive level, then wait and see if this constrains growth and increases unemployment enough to bring inflation back down to the central bank’s 2% target. If they don’t get the desired outcome relatively quickly, they’ll keep rates at the peak longer, rather than going higher. Emphasizing “longer” rather than “higher” has some advantages. It presumably reduces the risk of a hard landing: If monetary policy is somewhat tight, but not very tight, activity and employment should slow gradually. It gives Fed officials time to assess the consequences of their efforts, recognizing that monetary policy entails uncertainty and affects the economy with long and variable lags. That said, the downside risks are significant. Because less-aggressive tightening takes longer to bring down inflation, it might allow inflationary expectations to become unanchored – a dynamic that only even-higher interest rates could counteract. Also, the rise in rates matters as much as the level of rates. Over time, the effect of the higher level will fade – when, for example, the housing market has completed its adjustment to higher mortgage rates. Once that happens, further rate hikes will be needed to exert further restraint. There’s no free lunch. To increase its chances of getting inflation back down to 2%, the Fed has to be willing to push short-term interest rates higher when the economy doesn’t slow sufficiently and the labor market remains too tight. That increases the likelihood of recession. Volcker did what was necessary and beat inflation. Burns didn’t, and failed. How does Powell want to be remembered?

Bottom-line: 올해는 2014년 이후 중국 주식시장에서 외국인이 첫 순매도자가 될 가능성이 높음. 시진핑이 모든 권력을 중앙집권화 한 것이 가장 큰 위험으로 보고 있으며, 경제를 부양하기 위한 정책이 제시되거나 경제를 봉쇄하고 있는 정책이 해제되지 않았기 때문에 외국인들의 투자 심리는 바닥을 향하고 있음. 이미 홍콩항셍중국기업지수는 2008년 금융위기 이후 최저 수준에서 거래되고 있으며, 아마도 12월 중앙경제공작회의에서 어떤 활로를 제시할지 보기 전까지 이런 흐름이 이어질 수도 있음.

Foreign investors are on track to turn sellers of Chinese equities for the first time ever for the year, as concerns about a lack of supportive policies from the Party congress and a renewed Covid Zero push spook markets. Overseas investors sold a record net 17.9 billion yuan ($2.5 billion) of mainland shares via trading links with Hong Kong on Monday, according to Bloomberg data, tipping the year-to-date level into a small net outflow. If that holds through year end, it would be the first annual decline since the stock connect program was launched in 2014. Selling spread through markets on Monday following the nation’s twice-a-decade political event, with the Hang Seng China Enterprises Index tumbling to the lowest level since the 2008 financial crisis. President Xi Jinping’s consolidation of power was seen as a major risk, with expectations that the leadership reshuffle would bring a continuation of key policies like Covid Zero. “Foreign sentiment on Chinese stocks is low now,” as the party congress signaled no imminent changes to Covid policies, said Marvin Chen, an analyst with Bloomberg Intelligence. “Markets may need to wait to closer to the Central Economic Work Conference in December to see how the new leadership will address China’s economic challenges.”. China bears are growing by the day as traders turn skeptical over the nation’s economic growth due to its Covid-Zero policy and a heavily-battered property sector.

Docent: 인플레이션의 시대가 도래하며 주식과 채권의 자산배분의 틀이 흔들리고 있는 현재에 모건스탠리의 보고서에 대해 도슨트 역할을 하고자 함. 실상 우리가 경기침체 위험에서 주식의 위험을 방어해준다고 생각하는 채권은 1995년부터 2020년 시기의 이야기라 할 수 있음. 1970년대부터 1995년까지 25년 간 주식과 채권의 가격은 같은 방향으로 움직였기 때문임. 당시 인플레이션을 어떤 것을 감수하고도 잡겠다는 중앙은행의 의지로 인해 주가 하락에도 금리는 계속 상승하면서 채권 가격도 하락했기 때문임. 이 때는 'Buy the dip'이라는 저가 매수의 구호가 통하지 않았음. 반면, 이후 시기에는 중앙은행이 인플레이션보다 성장률 하락을 매 번 걱정하는 완화적 태도의 편향을 유지함에 따라 주가가 하락할 때 채권 수익률도 하락, 이로 인한 채권 가격 상승이 손실을 방어했음. 최근 여전히 주식 가격과 채권 가격의 음의 상관관계를 보면, 투자자들은 주식에 대한 저점 매수 작동원리를 완전히 포기하지 않았다는 생각임. 그렇다면, 주식 가격과 채권 가격의 양의 상관관계는 어떤 의미를 지닐까? 두 가지 중요한 점은, 주식 가격과 채권 가격 간 양의 상관관계는 진정한 채권 금리의 고점을 암시하는 것일 수도 있음, 더욱 중요한 점은 투자자들의 중앙은행에 대한 신뢰라 할 수 있음. 어떤 수단을 동원해서라도 인플레이션을 통제하겠다는 중앙은행의 의지를 인정하는 순간 두 자산 가격 간의 상관관계는 높은 양의 값을 가지게 됨.

In the high-inflation regime (1970s to 1995) – Bonds and equity returns were consistently positively correlated. Rates went up as a reaction to the Fed getting hawkish on inflation, and equities fell, and vice versa. Buy the dip didn’t work as efficiently. In the low-inflation regime (1995 to 2020) – Bonds and equity returns were negatively correlated. There were no high inflation risks, but instead the Fed was always more concerned about faltering growth. Rates went down as a cushion whenever equities went down, as the Fed always had a dovish bias (also known as“buy the dip”, or “Fed put”). Recent correlation numbers have been slightly negative – suggesting that even with highinflation and a hawkish Fed, markets haven’t fully abandoned the "buy the dip" regime yet. But if inflation persists, and the Fed maintains a sufficiently restrictive policy forsome time, the correlation might become more conclusively positive, line with the highinflation regime of the 1970s/80s. There are three corollaries from a positive equitybond correlation. Treasuries may not be as effective a hedge for equities/risk-off/recession as theyhave been for the last 25 years, but more likely the cause of such weakness inequities/risk markets. Positive correlation could be one signal suggesting a true top in yields. Once the correlation turns positive, it could suggest that most investors who may have had hopes of support from the Fed may be finally capitulating, and more likely to suggest a true “peak” in bond yields. Positive correlation could also indicate Fed credibility. A return to positive correlation of 1980s would be one way of concluding that the market sees the Fed ready to do whatever it takes to control inflation.

Bottom-line: 경기침체가 완만하거나 깊거나에 대한 것은 중요하지 않다고 제이피모건의 제이미 다이먼 최고경영자는 지적함. 그는 오히려 러시아와 우크라이나, 중국과 미국 등 지정학적 위험이 우리가 걱정하는 경기침체 위험을 훨씬 뛰어넘는다고 함.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said geopolitical uncertainties were among the biggest concerns facing the global economy right now, far outweighing the risk of recession. The most important thing is the geopolitics around Russia and Ukraine, America and China, relationships of the western world,” Dimon said at Saudi Arabia’s Future Investment Initiative conference in Riyadh on Tuesday. “That to me would be far more concerning than whether there’s a mild or slightly severe recession.”. A recession is not the most important thing we think about, he said. “We’ll manage right through that.”

Bottom-line: 뱅크 오브 아메리카의 시장 자금 흐름 분석에서 6주 연속 개별 주식에 대한 극단적으로 강한 매수를 관찰함. 주 된 주체는 헤지펀드와 개인 고객들 중심임. 이 매수 강도는 2008년 이후 99% 수준의 크기이며, 보통 이런 극단적 매수는 이후 급격한 매도세를 선행했던 현상이지만 이번엔 다를 것으로 긍정적인 전망을 했음. 헤지펀드와 개인 고객 매수와 반대로 공모 펀드 자금은 매도로 돌아섰음. 매수 된 자금은 주로 기술, 건강관리, 통신서비스 쪽에 쏠렸고, 금융과 에너지 쪽은 매도였음.

Bank of America Corp.’s clients poured money into US equities for the sixth consecutive week led by hedge funds and private clients, with the intake by single stocks nearing historic extremes. In the past three weeks, inflows into single stocks as a percentage of the S&P 500 Index’s market capitalization were in the 99th percentile of history since 2008, according to BofA strategists led by Jill Carey Hall. Prior extremes like this were followed by above average returns for the equity gauge over the subsequent months and one year later, they said. Still, “most prior instances of extreme inflows following the global financial crisis typically were preceded by extreme outflows in the several months prior,” Carey Hall wrote in a note to clients Tuesday. But that’s “not the case this time,” since cumulative inflows this year in US dollars have been the most positive in BofA’s data history, she added. Last week, buying was led by BofA’s hedge fund clients. Private clients also snapped up equities for the fourth straight week, while institutional clients sold stocks after buying for two weeks. Overall, clients bought stocks across seven of the S&P 500’s 11 sectors, led by technology, health care and communication services while financial and energy stocks saw the biggest outflows. They have been large net buyers of tech, media and telecom stocks at a time when flows were down for consumer discretionary shares.

The mighty dollar bites. Microsoft reported its slowest sales growth in five years despite resilient demand for corporate cloud computing services that pushed revenue above estimates. Alphabet stumbled with Google's core ads business — search, YouTube and the network division — all falling short of expectations. CFO Ruth Porat blamed "the effect of foreign exchange." Shares fell postmarket.

Bottom-line: 골드만삭스와 모건스탠리는 헤지펀드의 프라임 브로커리지 서비스를 담당하는 최대 규모의 증권사임. 이들이 집계한 데이터에 따르면 헤지펀드는 매도(Short selling) 비중을 초과하는 매수(Long) 비중이 이례적으로 낮아진 상태라 함. 이 비율은 위험선호의 척도로 사용될 수 있으며, 헤지펀드들은 본인들의 포지션을 줄일 수 밖에 없는 한계 수준에 도달하지 않기 위해 먼저 방어적 태세를 갖추고 있는 것으로 해석함. 이런 투자자들은 중앙은행이 지속적으로 긴축적 태도를 취함에 따른 매도 방향의 유동성 쏠림을 우려하고 있음.

Hedge Funds have cut portfolio leverage this year in a conservative turn that has sucked borrowed money from global markets, adding selling pressure to stocks and bonds. Net leverage, a measure of industry risk appetite that takes into account long versus short positions, has fallen almost 20 percentage points to a year low of 66%, according to data earlier this month from Goldman Sachs Group Inc.’s prime brokerage. Separate figures from Morgan Stanley’s prime brokerage show a similar decline to 41% among US long-short equity hedge funds, a level reached on only a small number of occasions over the past decade. The data, which was seen by Bloomberg News, provides one of the broadest snapshots of the sector. Goldman Sachs and Morgan Stanley have the world’s two largest prime brokerages, serving around 5,000 hedge funds each, according to the latest ranking by Convergence, a research provider. Prime brokerage executives from two other global investment banks said the drop in leverage was driven by defensive positioning among funds as interest rates have climbed and markets have fallen. They declined to be named discussing private matters. Hedge funds want to “make sure they are not getting too close to levels that would force them to sell,” said Charles Lemonides, chief investment officer of Valueworks, a New York Hedge fund. “A further market decline is going to stress that at some point. With every month that the Fed says they’ll get tighter and tighter, you resolve yourself to the fact we may enter one of those big liquidity-driven sell offs,” he said.