JPMorgan Tells Investors: Ignore Mainstream Media

Tyler Durden's picture

In its 'year-forward' 2017 outlook, JPMorgan's Marko Kolanovic warns that:

In the short-term, with additional rate hikes imminent and the record level of the USD, we are at an increased risk of repeating the scenario from January 2016 where fundamental and systematic investors were selling at the same time in the aftermath of a Fed hike (albeit, some risks are lower this time, such as higher Oil prices and a lack of focus on China/CNY). According to our macroeconomic model, the VIX also appears to be ~3 points too cheap (1 standard deviation) relative to dozens of macroeconomic variables.


So what is driving the VIX and is it still a good measure of equity market risk? There are several factors that can explain the behavior of equity volatility this year. The first one is structural and we described it as market pinning during most of July and August, caused by option positioning. At the peak of market pinning in August, the S&P 500 realized less than 5% annualized volatility and moved less than 10bps on a number of days. As Brexit, the US election, and the September volatility spike were well anticipated events, they also resulted in covering of option hedges, and opportunistic selling of volatility. Low/negative bond yields increased the allure of selling volatility (and buying equities) and put further pressure on volatility levels. Finally, it appears that the time horizon of macro traders has shortened dramatically, likely as a result of increased participation of machines and algorithms that are quicker to adjust to significant events and can eliminate trading activity of slower investors (such as the overnight post-election move).


What will market volatility be in 2017? We think that, fundamentally, risks for equities in 2017 are higher compared to 2016. We expect an increased level of geopolitical risk and increased uncertainties related to the new US administration. In Europe, significant risks include fallouts from Brexit, the referendum in Italy, elections in France and Germany, and continued tensions related to immigration. The Middle East will likely see further turmoil in relation to developments in Syria, and low Oil prices that continue exerting pressure on budgets of Oil exporters. While the US macroeconomic cycle may get a boost from the proposed fiscal stimulus, corporate tax reform and de-regulation, both the passage and efficacy of these measures are far from certain at this moment.


The main market risk for equities will come from a stronger USD and higher rates, in our view, which can destabilize equity P/E, Emerging Markets, the housing market, and US equity segments such as multinationals, domestic manufacturing, bond proxies, etc. Higher USD and bond yields will also undercut the ability of the new US administration to revive US manufacturing or use the fiscal deficit to re-ignite growth.


Periods of low volatility may mask underlying fundamental risks. These quiet periods will be followed by quick outbursts of volatility that may not last long enough to be captured by an average investor. Hedgers may buy volatility ahead of an event and sell shortly before the catalyst to capture volatility grinding higher (rather than a spectacular increase).


To gauge market risks, equity investors should watch for further increases in bond yields and strengthening of USD. Geopolitical developments should be gauged from both traditional and non-traditional data sources (such as big data sentiment indicators, independent media outlets, etc.) given the failure of many traditional data sources to anticipate geopolitical developments this year.

So in summary - don't trust the "fakeness" of a low VIX or the mainstream media when it comes to managing your money.

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JackT's picture

Lesson. Don't trust anyone with nothin'

El Oregonian's picture

Well, JPM say'in this? Who would of thunk...

Theosebes Goodfellow's picture

"Well, who are you going to believe?!? Me, or your own stinkin' lyin' eyes?!?"

More volatility in 2017?

Oh, yes. Most certainly.

StackShinyStuff's picture

If your mom says she loves you, fact check that shit...

2thepeople's picture

"Dont trust the fake news" eh?

Then dont fake the trust. You banker bitches.

Mass_hysteria's picture
Mass_hysteria (not verified) Dec 1, 2016 11:25 PM

trying to play along like he is the innocent..


hey we are the criminal bankers jpmorgan, dont believe the msm


we're good people! I swear! JPmorgan! We are for the people, not the banks!

myth_the_fallen_lords's picture

I love that TD thinks Kolanovic's recommendation that people read both traditional and non-traditional data sources is actually a recommendation to ignore the mainstream media entirely.

Obtaining basic reading comprehension might be a better starting point to manage long term personal finances.

damnfun's picture

Msm is falling apart.   VIX trading is a sham.  On the other hand, I wish the dollar would settle as its seriously interfering with the stack

....and, dont trust anoyone with nothin

JackT's picture

Exactly. All in how you read it.

holdbuysell's picture

Watch for dollar strength to cause a recession and outsized deficits in the US and mayhem in the emerging markets' $10T in dollar shorts (USD denominated debt). When everyone's suffering, that's when the dollar is split, one domestic, which is promptly devalued, and one international that can then be printed as needed to bail everyone out to make good on their debts (bankers never lose).

So far, the dollar strength trend is in.

Jim Willie may very well have called this one.

Stan Smith's picture

That's rich.   They push a story one way, no one buys it, now they say dont listen to anything the press says.

Unintentional Comedy at its finest.

holdbuysell's picture

JPM validates the independent media.

Bezos, your move.

BorisTheBlade's picture

Bezos, your move.

Intimidate workers further, seems snowflakes have a thing for emotional torture:

As far as JPM, money talks, no matter how much of it was poured into Hillary and into pushing old and tired narrative, ground has shifted and MSM being tools they are did not anticipate the change. Or rather, were in active denial of the ongoing developments. In doing so, MSM did public a major disservice, but most importantly to their donors, who will also reconsider. I say good riddance, MSM will also have to adapt or die slow and agonizing death. Ironically, their saviour is the one they were attacking the most previous year, Mr. Donald J. Trump who has the capacity to generate proper audience and ratings with little resources. So, whenever he summons major media bozzos to his tower to give them a proper beating, they should be grateful as he's giving them another chance for survival:

Mini-Me's picture

Real news would involve jailing (or hanging) some bankers.  Nothing changes until that happens.

Rock On Roger's picture

Tricky trickster banksters.


Fuck Jamie.

Clowns on Acid's picture

Oy Jamie...Is the Fed part of Mainstream Media...?

Yen Cross's picture

  Haa--- Did El Capitan obvious write that piece?

coast's picture

seems trump is winning pennsylvania......hilalry and jill went up the hill, to fetch a pale of water, hillary fell down, and broke her crown, and jill came tumbling after....

coast's picture

I screwed up..sorry.   I try so hard to be accurate but sometimes I do not follow my own rules to research...the link I gave is not valid for current day...please forgive me, I like you guys and at least I am apologizing for my poem was kinda cool tho yeah?  :-)

ebworthen's picture

Translation:  "Keep sending us your money, please!!!"

G-R-U-N-T's picture

funny that JP Morgan decided to broadcast that the MSM is full of shit, after Trumps win, which begs the question: What would their response have been if the 'career criminal' won the election?

LOL123's picture

Ouch... JP Morgan just called out main stream media as FAKE NEWS... Can we quote them on that?  Lol

RedDwarf's picture

Cracks are showing in the monolith.  JPM wants to survive the paradigm shift they see coming.

HeyThere's picture

Pizzagate = Psyop...... Or top-level pervs tossing low-level pervs to the wolves?

Ink Pusher's picture

JP Morgan was already repeatedly fined since 2014 for producing and publishing FALSE NEWS and STATEMENTS and is currently faced with pending related litigation concerning false and misleading statements being published.

With bankers like these who needs enemies?