Expected and historical (realized) volatility are sending investors a puzzling signal. Because of the Iran conflict, intense oil price swings, and rising interest rates, the VIX, or implied volatility (what options markets are pricing in as future fear), is elevated. However, actual realized volatility has been much more subdued. That gap between the VIX and […]
Geopolitical events are among the most reliable drivers of bad investment decisions. When headlines are alarming, and markets are volatile, as they are today, investors instinctively overweight worst-case scenarios and underweight the likelihood that the situation resolves more quietly than feared. Behavioral finance calls this availability bias: the tendency to judge the likelihood of an […]
Albert Edwards from Societe Generale posted a graph similar to the one on the left below. It tracks the unemployment rate and its 3-year moving average. The red arrows signify every time the unemployment rate rose above the moving average. As we circle, the unemployment rate is now above the moving average. Albert’s comment alongside […]
Some media pundits are warning the public that high oil prices will spark a repeat of the high-inflation era of the 1970s. High oil prices will feed through to inflation; however, the economic, monetary policy, and geopolitical environments of the 1970s are quite different from today’s. To wit, consider the following reasons for inflation in […]
According to a recent analysis by the Wall Street Journal, corporate treasurers are fundamentally shifting how they approach the capital markets to navigate record-breaking supply. Rather than offering debt in monolithic blocks, firms are increasingly utilizing multiple corporate debt tranches to better manage investor demand. This strategic shift has pushed the average number of pieces […]
The Stone Ridge Alternative Lending Risk Premium Fund (LENDX) is the latest to face liquidity pressure amid growing concerns about private credit. As an interval fund, LENDX’s shares aren’t publicly traded, so investors who want out must tender their shares for repurchase by the fund quarterly. Last Thursday, the $2.4 billion fund told clients that […]
Many investors consider a 20% drawdown or more to be a bear market. Based solely on that definition, the table below, courtesy of Morgan Stanley, shows that 42%, or over 200 of the S&P 500 members, are in a bear market. For context, the S&P 500 is only down 4% from its 52-week record high, […]
Few Fed meetings in recent memory have presented the FOMC with a more uncomfortable set of competing signals than yesterday’s. The Iranian conflict and its impact on oil and oil-dependent product prices have created the potential for an inflationary impulse, yet higher oil prices would likely slow economic activity, leading to higher unemployment. As if […]
A client sent us the quote below from Michael Oliver of Momentum Structural Analysis and asked for our comments regarding gold and the growth of the M2 money supply: “…if you are taking profits in gold and putting that into cash Dollars, thinking that’s a good idea, then go to the St. Louis Fed’s site […]