Volatility Collapses (Again) As Investors Cling To Goldilocks Outlook On Brexit Wednesday

It’s quiet out there. Well, except for that whole UK officially leaving the EU thing. As outlined earlier this morning, Theresa May will make the UK’s split with the EU official on Wednesday, sealing the economic fate (literally, as they’ll be a hand delivered letter involved) of the British people and very possibly relegating the…

“Quick, Buy That (Macro) Dip!”

Earlier today, we noted that the correlation between implied vol and equities is breaking down as traders buy cheap protection on expected surges/plunges while the market continues to grind ever higher. As WSJ writes, “cash flooding in from private investors has pushed up the market overall, but has also led professionals to worry a little more about the…

Another Market Anomaly Emerges

More than a few (hundred) commentators have taken a stab at explaining why volatility has remained glued to the flatline over the past several months and to be sure, I’ve flagged suppressed vol as a warning sign that markets are too complacent on more than a few occasions in these very pages. For those who…

“There’s No Point Denying The Reality We Live In”

On Monday in “There Are Plenty Of Investors Who Would Celebrate An 8% Drop,” I noted with more than a little amusement that self-described “perma-bull” Mark Cudmore had gotten over a fleeting bout of bearishness that manifested itself in a series of overtly negative late January missives. Well on Wednesday, Cudmore is back with another…

Beware The German “Hump”

I’ve talked tirelessly (well, I haven’t gotten tired of it, maybe you have) about the extent to which markets are or aren’t correctly pricing event risk around Europe’s trio of electoral trials by fire. For obvious reasons, the French elections have gotten the most attention. That’s probably justified given the fact that there’s a non-negligible…

“A Glaring Error Of Omission”

  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…

“JP Merlin” Returns: Quant Wizard Kolanovic Weighs In On Volatility, Geopolitics, And The Fed

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…

The Week That Was: “The Hardest Thing To Do Is Justify Hedging”

Well, it’s been one hell of a week. We started on a sugar high thanks to last week’s impromptu “phenomenal” tax plan “announcement” and the reflation narrative got another boost thanks to an “unexpectedly” hawkish Yellen on Capitol Hill and a CPI number that blew the roof off. It also helped that Trump didn’t physically assault…

Here Comes The Next “Tantrum”

I’m always warning about VaR shocks. More specifically, I like to remind investors that in the event rates reprice sharply higher, the return correlation between stocks and bonds could well flip positive as equities interpret the sudden spike in yields as a risk-off event.  In short, that means stocks and bonds sell off together, leaving…