BlackRock stated that $9 trillion in cash is accelerating the return to risk assets, and multiple events this week may amplify market volatility
Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, stated that after the U.S. and Iran reached a peace arrangement, approximately $8 trillion to $9 trillion in funds sitting in money market funds are accelerating their return to risk assets, and he mentioned that this process could have an "explosive" effect. Driven by the return of funds, U.S. stocks and U.S. bonds rose simultaneously on Monday, while oil prices fell due to expectations of a reopening of the Strait of Hormuz.Rieder believes that current liquidity is spreading from low-risk instruments to a broader range of assets, and he expects that the new Federal Reserve Chairman Kevin Warsh may pay more attention to balance sheet and money supply management, rather than solely relying on short-term interest rate tools. Meanwhile, the derivatives market is set to face a busy event window. Due to the June holiday market closure, this week's "Triple Witching" has been moved up to Thursday, combined with the quarterly rebalancing of the S&P 500, increasing volatility risk in U.S. stocks. Additionally, options related to SpaceX are expected to begin trading on Tuesday. Market participants believe that driven by retail investor funds, related contracts may heat up quickly, potentially leading to a "gamma squeeze" triggered by concentrated buying of call options.Brent Kochuba, founder of SpotGamma, warned that against the backdrop of a continuous rise in U.S. stocks since April, the pressure on market makers to hedge is accumulating. If Warsh releases signals that exceed expectations during his first press conference, the market has almost no buffer space to absorb the shock. The quarterly adjustments to the S&P 500 index will also take effect after the close on Thursday, with Marvell Technology (MRVL) and Flex (FLEX) being added to the index, while Pool (POOL) and Campbell's (CPB) will be removed.