S&P 500 Futures Financing

  • The financing rate for equity exposure via futures has been very high.
  • The S&P 500® financing spread can’t be directly observed, but it can be estimated by comparing the actual price of futures to the fair value implied by dividend forecasts, interest rates, and spot prices. Figure 1 plots one such estimate since 2012.
  • Reasons here.

Globalization’s Resiliance is Partly Tax

  • Globalization has also persisted because the Trump-Ryan reforms to the U.S. corporate tax system, implemented through the Tax Cuts and Jobs Act (TCJA), did not end tax-related incentives for U.S. firms to offshore production and profits.
  • A reversal of the latter could be an issue for big pharma and semiconductor firms.
  • China’s export-led growth strategy is the other, admittedly larger, driver.
  • Blog post here and full paper here.
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