Summer Vol Bleed?

It's probably fair to say US soft landing odds increased materially over the past several sessions. Notwithstanding some cracks in the household survey, the May jobs report showed the labor market's hanging in there, and then some. And back-to-back favorable reads on inflation (CPI and PPI) pretty plainly suggest downside "risk" to the new PCE forecasts from the June SEP (with the scare quotes to denote that "risk" is a good thing in this context). In short, the soft landing crowd likely feels

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8 thoughts on “Summer Vol Bleed?

  1. As you note and shown on the chart, the correlation dispersion appears to be a result of the narrowing market leadership in the S&P 500. It is feeding on itself!

      1. Until it isn’t. One characteristic of continuous distributions is that they must pivot, unexpectedly, in the future. A French mathematician named Rene Thom studied this phenomenon extensively and published his models in a book called Catastrophe Theory.

  2. I’ve noticed the small caps feeling crashy after rallies — hit some nice PUTS last week after small cap earnings blowouts

  3. One has to be little careful interpreting those internal correlations on the S&P 500, as they will always fall during earnings season due to higher dispersion.

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