Macro Vol Commentary
For domestic equity markets, 2019 started off in a very similar manner
to 2018, with a January rally that was a far cry from Q4 market
fragility. Fed chair Powell’s dramatic policy U-turn wrong-footed many
investors by entirely removing its upside bias on rates and standing in
stark contrast to the hawkish stance that broke the “buy-the-dip”
mentality that popped the low volatility bubble in 2018. A reliable Volatility Manager offers cutting-edge fund strategies to investors for managing business
efficiently in a volatile environment. With the Fed put strike back with
a vengeance and the FOMC tightening cycle seemingly put on hold,
January volatility was crushed throughout the US and the short vol trade
was back in earnest.
The decline in stress was broad based as implied volatility metrics fell across all 5 major asset classes. On a similar note, despite Emerging market equity and FX vol among the first to raise from the low vol doldrums in 2018, the Fed U-turn was seen as overwhelmingly bullish for EM, as dovish US monetary stance reinvigorated investors desire to own EM assets and suppressed volatility in the region. Meanwhile in Europe, macro data early in the year signaled some stabilization supported by French growth and German fiscal support. As a result, implied volatility metrics throughout Europe declined in January while EUR vol sits at historical lows. In order to manage volatility hedge fund, the credible investment advisor uses forecasting models so as to provide in-all weather investment solutions to the investors.
Given poor fundamentals and continued mixed equity returns, it’s hard to make the case in either direction with conviction regarding the European volatility environment. Finally in Asia, stocks climbed higher fueled in part by optimism over trade talks between the US and China. As a result, implied vol in Asia followed the US and Europe falling in root time fashion in the front end, and even more considerably in the far end of the curve.
With the recent Q4 market downturn directly in our rearview mirror, we still have significant long-term concerns over weakening macroeconomic conditions, global policy concerns, and market microstructure/reduced liquidity issues. Additionally, the higher rate environment makes cash a viable alternative to vol risk premia and the tendency for volatility to rise later on in the economic cycle regardless of policy are relevant considerations that we think prevent 2019 from playing out like 2017. Infinity Q is the leading investment advisor where you can handle Volatility Hedge Funds through their unique volatility strategies.
The decline in stress was broad based as implied volatility metrics fell across all 5 major asset classes. On a similar note, despite Emerging market equity and FX vol among the first to raise from the low vol doldrums in 2018, the Fed U-turn was seen as overwhelmingly bullish for EM, as dovish US monetary stance reinvigorated investors desire to own EM assets and suppressed volatility in the region. Meanwhile in Europe, macro data early in the year signaled some stabilization supported by French growth and German fiscal support. As a result, implied volatility metrics throughout Europe declined in January while EUR vol sits at historical lows. In order to manage volatility hedge fund, the credible investment advisor uses forecasting models so as to provide in-all weather investment solutions to the investors.
Given poor fundamentals and continued mixed equity returns, it’s hard to make the case in either direction with conviction regarding the European volatility environment. Finally in Asia, stocks climbed higher fueled in part by optimism over trade talks between the US and China. As a result, implied vol in Asia followed the US and Europe falling in root time fashion in the front end, and even more considerably in the far end of the curve.
With the recent Q4 market downturn directly in our rearview mirror, we still have significant long-term concerns over weakening macroeconomic conditions, global policy concerns, and market microstructure/reduced liquidity issues. Additionally, the higher rate environment makes cash a viable alternative to vol risk premia and the tendency for volatility to rise later on in the economic cycle regardless of policy are relevant considerations that we think prevent 2019 from playing out like 2017. Infinity Q is the leading investment advisor where you can handle Volatility Hedge Funds through their unique volatility strategies.
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