Commodities

Expect Nasty Volatility & Shocks This Summer

Expect Nasty Volatility & Shocks This Summer

With the stock market heading no where for the last 4 months of this year, it is high time we took a step back and view things from a systematic angle. As we approach the "sell in May and go away" phase of the year, equity returns are looking more vunulrable to adverse shocks, and flares in volatility.

YTD, the S&P 500 is almost unchanged, down marginally. Bonds (quality) and commodities (short USD) have been the best performers for the last 4 months. Vol of vol (VVIX) has remained elevated but is not yet deemed to be at alarming levels. What's in store for us may be a surprise. Or actually maybe not.

When we piece this puzzle back in a way BofAML calls the "3P's of Positioning, Policy & Profits", we can come to the conclusion that the risks are skewed south, and things could turn uglier very promptly. Therefore, it may be wise to expect very moderate returns from equities. One may wish to overweight cash, bonds, and gold while avoiding equities and non-IG corporate credit.

Here's Why Dumping Risk & Buying Cash Might Be The Smartest Move This Year

Here's Why Dumping Risk & Buying Cash Might Be The Smartest Move This Year

It's been an extremely busy first week of 2016 for Business Of Finance. Global markets are in a state of frenzied chaos, much like a chicken running around without its head.Only this time every risk asset has been sold with reckless abandon while liquidity is conversely bid to the moon. Anyone who shorted risk, went long volatility, and stayed in cash since Christmas week would be gleefully grinning at the poor folks who are trapped in 2015's outdated ideologue 

While we are hard pressed for time, we feel we need to put this piece out to give readers a first glance of what 2016 might be like for the markets all across the world. We have a feeling 2016 may be markedly different from the past 5 years where cash might actually be the best performing asset. Yes, being in cash is a position in and of itself.

In layman's speak, you ether go big or go home in 2016. At least that's what we think. You could make a hack a lot of profits or loose your shirt in the kind of markets we've been greeted with so far. So buckle up, sit tight, sell risk and buy cash.

April Review & Looking Forward (Part 2: Strategy)

April Review & Looking Forward (Part 2: Strategy)

In Part 1 of this note reviewing the eventful month of April, we spoke about how the tide was shifting in many of the developing economies with Europe's economy and financial conditions showing good signs of improvement while the American economy was undoubtedly slowing. We also spoke about macro economic cycles and how such polarities in the major economies have created exclusive opportunities in the financial markets.

With the current market climate hallmarked by panic, fear, and ephemeral swings, we have detected a couple of opportunities over the last couple of weeks that look promising in their own rights. In the last 2 weeks alone, a few records have already gone down the record books. This is heaven for opportunists.

In today's note, we wish to share our views and ongoing opinions on how we view the current market landscape and the strategies that we are and will likely be implementing to take advantage of the substantially different dynamics in today's environment.

April Review & Looking Forward (Part 1: Analysis)

April Review & Looking Forward (Part 1: Analysis)

April is set to close with a bang on what is easily the busiest week in terms of economic data releases for a long time. We have various sets of CPI and employment data releases from Europe the developed economiesGDP figures are also set to hit the wires, chiefly from the UK, US, and Canada

Central banks will be in hard focus where Australia's RBA fired the first salvo, followed by the FOMC, with New Zealand's RBNZ following suit. The BoJ will also hold its press conference. It is safe to say the market's attention will be fixated on the US 1Q15 GDP figures and the ensuing FOMC statement and press conference.

In this note, we will briefly go over some of the key developments we have seen in April across the globe from the American economy, to the renewed conflagrations in the tug of war between Greece and its creditors, to China's economic woes and financial troubles.

In Part 2, we will touch on the various markets we cover, present our views and purported strategies to trade them going forward.