This coming Sunday, December 4, 2016, a constitutional referendum will take place and the citizens of Italy will decide on a proposal by Prime Minister Matteo Renzi that, if passed, would mean major changes to Italy’s legislative system. The Prime Minister has stated his intent to resign if the “No” camp triumphs. The political stakes…
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It’s been a roller coaster week in the aftermath of the startling conclusion to the U.S. Presidential election on November 8, 2016. As recently as a week before the election, equity markets were quite calm, although volatility levels recognized the possibility of a surprise Trump victory. When that victory occurred, U.S. futures declined significantly before…
Donald Trump’s unexpected success initially threatened to send the U.S. equity markets into steep decline. Yet as I write, the S&P 500 has moved very little since yesterday’s close (it is up a little), while the VIX has fallen dramatically. So why (or how) has volatility remained so low this morning when everyone expected it to…
Quiet Before the Storm? Global markets seemingly remain unperturbed—despite homing in on Election Day in the U.S. Although dispersion ticked up globally from September month-end levels, it is still sitting at below average levels as of October 31 in the U.S. Similarly, correlation is also well below average. Together these coordinates are pointing to particularly…
The prospect for and ramifications of rising interest rates have surfaced time and again in recent years. Whether and when the Fed will raise rates next is anyone’s guess. But as we’ve noted before, the correlation between higher interest rates and equity declines has grown tenuous in recent history. Since 1991, the S&P 500 has…
In step with the July, global markets calmed further in August. Based on the dispersion-correlation map, which provides a framework through which we can assess market volatility, equities have entered a very tranquil environment. It wasn’t too long ago that correlation spiked in equity markets due to geopolitical events. That heightened correlation was resolved swiftly…
Regular readers of this blog will be familiar with industry-wide comparisons made between the returns of active funds and their passive equivalents. Studies comparing the risk of active funds are rarer, but have the potential to provide actionable insights: at the very least, examinations of fund risk can help to evaluate the a claim that active…
The dispersion-correlation map helps us to understand the dynamics of market volatility better. Last month we observed high levels of correlation in markets across the globe following the unexpected results of the Brexit referendum. High correlation levels can be a reflection of market fragility. However, as current dispersion and correlation levels indicate, the heightened readings…
As an exercise in understanding market volatility, we recently introduced the dispersion-correlation map to see how volatility manifests in dispersion and correlation. We saw very high levels of correlation at the beginning of January for both the S&P 500 and S&P Europe 350; the S&P Pan Asia BMI also sat at above average correlation then….
Despite some warnings from volatility gauges, the market had “priced in” a vote for remain from the UK’s population. This has made for some dramatic headlines, and large movements since the vote to leave the EU was announced. As the market scrambled to make sense of the political chaos, three key themes have emerged from the…
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