"...there is a long way to go between President-elect taking office, drafting bills and getting them passed. There is even a further period of time before any actions actually passed by the Trump administration actually create perceivable effects within the broader economy. In the meantime, there are many concerns, from a technical perspective, that must be recognized within the current market environment."
The breadth of redemption pressure in October was the industry’s largest in 2016 with 61% of reporting funds estimated to have net outflow during the month. Essentially, flows in October were poor not necessarily because investors redeemed from the industry, "but no one is really allocating with any enthusiasm."
The market barely had time to respond to today's surprising rate hike by the Turkish central bank, when an even more unexpected development took place in the European Parliament which voted overwhelmingly to temporarily freeze talks on Turkey’s bid to join the European Union, citing deteriorating human rights and democratic standards under President Recep Tayyip Erdogan’s rule.
After last week's victory by Donald Trump which unleashed the great Trumpflation rally, the not so low vol went off the charts, and "the shoe officially dropped" because as Bloomberg notes, the "Low Vol" iShares Edge MSCI Min Vol EAFE ETF saw a record one-day outflow on Wednesday.
"The US election will help all those who have not had the courage to come out and say 'I will vote No'," proclaimed one of Italian PM Renzi's opponents as The FT reports the centre-left prime minister’s referendum on change is threatened by the global populist wave. Even before the US election, he faced a struggle to secure victory in the referendum, with most polls tilting in favor of voting 'No', albeit with many undecided voters, but opponents claim "many undecided voters in the polling booth will say ‘No No No’, just like Trump voters."
What are the implications from the shift toward passive investing? According to JPM there are two big ones: i) Markets become more brittle and systematically risky; ii) Crashes, when they happen, will be bigger and worse iii) Markets become less efficient
European, Asian stocks fell while S&P futures rebounded as investors assessed a mixed batch of earnings reports while the dollar strengthened to 9 month highs versus most of peers on rising confidence that the Fed will raise rates this year, pushing global bond yields higher.
The ink wasn't even dry yet on the just concluded historic, upsized and dramatically oversubscribed bond sale by Saudi Arabia which raised $17.5 billion and Saudi Arabia was already begun spending the money. Roughly at the same time as the wire transfers were taking place, the Saudis were busy repaying debts to state contractors, after long delays that squeezed company finances and hurt investor sentiment.
Remember when two weeks ago the China Beige Book warned that "It’s A Lot More Negative Than People Think" in the world's second biggest economy? Well after months of complacency about the Chinese economy and financial risks emanating from its $35 trillion financial sector, overnight the world got a rude awakening when China export figures tumbled, signalling a deeper slowdown than many anticipated just as the Fed prepares to raise interest rates.
Is “Low Vol” the next shoe to drop, asks Bank of America and notes that "Low vol" has become more risky: the realized volatility of low beta stocks has seen a steady increase over the past several years, suggesting low vol is becoming high vol.