Tag Archives: volatility

S&P Risk Parity Indices: Positioning for Uncertainty

Uncertainty has been a common theme throughout 2019, and the third quarter proved no different. The quarter was dominated by uncertainties surrounding the U.S.-China trade talks as well as falling global growth forecasts. Demand for high-quality fixed income assets increased, pushing the yield on the 10-Year U.S. Treasury Bond down 34 bps. In spite of Read more […]

VIX® Dropped Below S&P 500® Realized Volatility

While everyone has been concerned about the inverted yield curve, the CBOE Volatility Index® (VIX) has been under the 21-trading-day realized volatility of the S&P 500 since Aug. 16, 2019. Since volatility traders care not only about what is expected but also what actually transpired, the spread between implied volatility and realized volatility is one Read more […]

Why the Volatility Spike is the Low Volatility Strategy’s Best Friend

The first half of 2019 saw one of the biggest rallies in the domestic market; the S&P 500® rose 18.54% on a total return basis despite concerns of slow economic growth, a trade war, and a possible rate hike. During the same period, the S&P 500 Low Volatility Index surprised the market and rose even Read more […]

Implied Plunge Protection

Ever since its formation in response to the “Black Monday” crash of October 1987, the United States “Working Group on Financial Markets” has been accompanied by (persistently-denied) rumours that the group used government funding to make large equity purchases whenever the market fell – giving rise to its informal moniker of the “Plunge Protection Team”.  Read more […]

Not Melting Yet

Despite the hovering cloud of geopolitical menace as we entered 2019, the U.S. equity market enjoyed an almost seamless rise through the first four months of the year. May’s retreat reacquainted investors with volatility and served as a reminder that the market is near all-time highs, having enjoyed a more or less sustained increase for Read more […]

Positioning for Market Volatility Using Passive Strategies

Fluctuating periods of “risk-on” and “risk-off” mean that spikes in equity market volatility and large drawdowns are increasingly common in today’s economy. Exhibit 1 shows events throughout the current market cycle causing notable rises in volatility and large drawdowns. With more of these likely in the future, as our long bull market cycle ages, how Read more […]

The Height of the Hurdle

Indexing provides many rewards, including a reduction in volatility. Asset owners should demand higher returns to justify the volatility that active management entails. For managers who put their stock selection skills to the test, it is worth understanding the height of the volatility hurdle in managing a portfolio’s risk/return profile. We can illustrate this by Read more […]

S&P 500 Posts 5th Best Start In First Two Months

After the hottest January in 30 years, the broad market rally continued with 38 of 42 segments of the U.S. equity market positive in February (as of Feb. 28, 2019.)  After the Fed said it could take a break from rate hikes and it would be flexible with its balance sheet, and the market rallied, Read more […]

Active Management for Volatile Times?

This morning brought a report that “retail investors have returned to Wall Street, pouring money into mutual funds focused on US equities for the first time since early 2015, according to data from TrimTabs Investment Research…. ‘Maybe people think, in times of higher volatility, active managers will do a better job,’ Winston Chua, an analyst Read more […]

Volatile but Not Necessarily Disastrous

In 2018, the S&P 500 declined for the first time in 10 years. The year’s 4% decline is obviously de minimis compared to 2008’s 37% plunge, though investors may feel it more keenly since the fourth quarter’s 14% decline erased what had been a profitable year.  Nonetheless, the risk landscape changed dramatically in 2018 compared Read more […]