So this is something that’s worth watching… We’ve said time and again that investors would do well to remember what risk parity knows all too well. Namely that you really, really need a negative stock-bond return correlation when vol spikes and there’s blood in the water in one asset class or the other. Why? Simple:…
So earlier today in “To ‘Tantrum’ Or Not To ‘Tantrum’, That Is The Question,” I said the following about the juxtaposition between hedge funds’ big Treasury short and still long equity positioning: …if the highly anticipated repricing of yields higher turns out to be …err… higher-er–er than expected, the long equities side of this bet…
VaR shocks. Taper tantrums. I talk about such things a lot. And with good reason. Investors have a discernible tendency to dismiss discussions of cross-asset correlations as if the subject should be confined to jet propulsion laboratories. All the while, these very same investors fail to see the connection between cross-asset correlations and the…
He doesn’t have a long, white beard. He doesn’t wear a robe or a pointy hat. And he doesn’t walk with a gnarled, magic staff. But that doesn’t stop us from characterizing JPMorgan’s resident quant wizard Marko Kolanovic as a kind of Gandalf figure. Regular readers know Kolanovic. His star has risen over the past couple…
So what does any of this mean for average investors? Well, intuitively, it means there’s a chance for you to go out and find yourself some alpha by returning to your roots as an expert stock picker (boy, this post is just dripping with sarcasm).
The problem – or at least one of the problems – seems to be that whenever some people hear “correlation”, they Marty McFly it right back to high school science class and regurgitate the old “correlation doesn’t equal causation” line and then subsequently tune out as if they’ve dropped the mic on me.
I’ve talked a ton about cross-asset correlations here and elsewhere over the past few months. Indeed, the entire Trump reflation trade is based on negative stock/bond return correlations (i.e. a return to the post 2000 norm and a welcome break from the fear that dominated markets last September when quite a few observers feared the…
What happens to stocks now?…
There’s nowhere to run. But who cares?
