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Will The Modern Market ‘Virtuous Cycle’ Resume In January?
Remember the post-December FOMC vol shock and correlation spike?
If not, don't fret. That was two weeks ago, after all, and many of you have probably done a lot of drinking since then.
To briefly recapitulate, the VIX, vol-of-vol and gauges of implied correlation spiked hard in the wake of the Fed's new dot plot, which tipped just two cuts in 2025 versus the four conveyed by the September SEP.
As the simple figure shows, that session (December 18) was the second-worst day of an otherwise o
An interesting interaction between mechanical releveraging and humans trying to guess at the imminent future.
Smarter traders than I should be (or are?) putting their money and effort into building models to predict and front run the volatility-driven models rather than wasting their time trying to forecast revenue and earnings going forward.
And to think … that stuff mattered once. A Long time ago when dragons and unicorns roamed the earth alongside dinosaurs and neanderthals.
I sometimes wonder if ETFs (and the trading of them) aggrevates non-fundamental driven flows – but then, speculators will always be willing to chase tulips until, … but agree mechanical flows of the fastest traders in the world are today’s trading zen – glad I’m not a trader – too old, slow.