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Bullish Case: Anticipated infrastructure investment boosts demand for SMID services, potentially reversing recent downturns. Historical data supports recovery trends post-corrections, contributing to positive sentiment in the market for the next year.

Bearish Case: Persistent volatility and macroeconomic pressures, including potential rate hikes, could further destabilize SMID. Mean-reversion patterns suggest short-term declines, risking further downturns in the mid-cap sector over the upcoming months.

Potential Outcomes:

1. Continued growth (30%): Infrastructure demand increases significantly.

2. Market correction (50%): Economic volatility leads to retraction in mid-cap performance.

3. Volatility spike (20%): Elevated market reactions to macroeconomic news create trading opportunities.

Trading Oracle: Consider initiating short volatility credit spreads on SMID, particularly for premiums targeting Q4 2024 expiry. Leverage current volatility to enhance profitability. Maintain a bearish stance with a time horizon focusing on the upcoming macroeconomic events for potential catalysts.

August 15, 2024