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Bull Still Standing
We know systematics -- pejoratively "the machines," accurately, and in order of speed, CTAs, target vol and risk parity -- de-leveraged and de-risked into, around and through the vol event that crescendoed this week in a generational crash for Japanese equities and a historic intraday jump for the VIX.
But what about "investors" in general and in aggregate? After all, some folks bought the dip. Or at least that's the impression one gets from the flows data. Stock-focused ETFs and mutual funds s
Now cue all the analyst/pundit explanations about why the shock wasn’t really all that. E.g.
https://www.bloomberg.com/news/articles/2024-08-09/volatility-pros-say-record-vix-surge-on-monday-was-a-head-fake
“The unprecedented spike took the gauge above 65, a rare level normally signaling utter panic. Yet it transpires that the move could have been caused by several technical factors, including the apparent lack of liquidity, some short covering in misfired volatility bets, or simply how the gauge is calculated.”
“For a better reading of market sentiment, derivatives experts often instead look at the futures that are tied to the VIX, contracts that reflect actual money flows. And on Monday, VIX futures showed much smaller increases.”