Shopping Cart -

Your cart is currently empty.
Continue Shopping
This website use cookies and similar technologies to improve the site and to provide customised content and advertising. By using this site, you agree to this use. To learn more, including how to change your cookie settings, please view our Cookie Policy
Pocketmags Digital Magazines
Pocketmags Digital Magazines

Man FRM Early View

October 2018


Last month we published one of our more bearish Early Views of the last few years, and it is surprising that we were so prescient. There have already been reams of commentary on the recent equity market behavior; therefore our concise summary of market returns in October is that it was equity-specific and technical. Volatility in other asset classes was contained, and the losses were (at least initially) caused by a position clearout in growth stocks and a somewhat delayed repositioning in reaction to higher bond yields rather than a material deterioration of fundamentals at either the corporate or sovereign level.

As always, we are trying to keep our focus on the bigger picture. While equity markets have entered correction territory in most developed markets, barring a few mark-to-market losses here and there the financial system appears to be functioning fairly well thus far. There is, however, little clarity as to what active managers should do from here. ‘Buythe- dip’has been the best trade of the last decade, but while drawdowns of 5-10% in the S&P 500 have all been recovered in a matter of weeks, there have only been three drawdowns greater than 10% since 2008 – and these each took over 6 months to recover (even with the help of QE). Another concern is that we may be at a turning point in preferred risk factors of markets. We’ve had roughly a decade of returns to the Growth factor since 2008, which followed eight years of returns to Value from 2000- 2008. With rising bond yields and rising inflation, a return to a Value-led market is clearly possible. With many market participants who were not around in 2000, there is an enhanced sense of confusion. More broadly, none of the concerns that we outlined last month has really emerged yet. We are still worried about negative feedback loops arising from higher inflation, positive correlation between equities and bonds, and poor market liquidity. These systemic shocks could spread across all asset classes.

Purchase options below
Find the complete article and many more in this issue of The Hedge Fund Journal - Issue 136 – Nov 2018
If you own the issue, Login to read the full article now.
Single Issue - Issue 136 – Nov 2018
Or 11999 points
6 Month Digital Subscription
Only $ 120.00 per issue
Or 59999 points

View Issues

About The Hedge Fund Journal

Informing the Hedge Fund Community. With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry.