‘THE BIG PUT IS DISAPPEARING’
Mrs Ash has described me as monotonous. I have told her repeatedly, that this is not true. Sometimes however, I do find myself repeating what I have said, especially when talking about markets, as do others.
I want to discuss ‘Outrage Fatigue’, a term used a lot by the excellent Jesse Felder. We are continually bombarded by so many pieces of information that the media tells us we should be outraged by, that we simply become immune to the shocks. Literally, whatever is thrown at markets now has limited reaction. This human degree of confidence in journalistic over-dramatisation started, ironically, while the Federal Reserve instigated its infamous ‘put’. If markets were ever in trouble, central banks would cut rates, or halt raising them, to safeguard the benign environment for investing.
As social media has grown, the effectiveness and probity of the press has waned dramatically, as they desperately strive to compete with publicly derived sensationalism. Our belief in stories is considerably diminished from where it was even 10 years ago.
Therefore, at a time when markets have been safeguarded by the central banks, investors also disbelieve swathes of press judgemental interpretation. With this ‘so what?’ attitude to events and the dramatic reporting of them, comes a numbness and consequently a resignation towards the barren norm. We have never been exposed to so much information within such short times frames. We have never been so overwhelmed by inaccurate information and we have never been offered so many products that are meant to safeguard our investment hubris (indexation).
WE HAVE OUTRAGE FATIGUE. In 2018, the S&P has endured a volatile time, despite VIX now returning to a sedate 13.22, which is where the 30-day historic volatility at 10.4 dictates it should be, 50-day historic volatility is 17.2, so gives a reminder how recently we were in choppy waters. The average VIX price for 2018 is 17.3, the average for 2017 was 11.3.
Recently, the new Fed Chairman, Jay Powell, made it clear that there was going to be no future ‘equity market put’ in his tenure, despite a few Fed speakers tempering this statement afterwards. It does now also seem that the Fed will allow inflation to run a bit hot before it slips into overdrive in raising rates. There is designed to be no equity market help but rates are unlikely to go up as fast as previously thought. Half of that scenario, at least, is good for bond markets and is the kind of trigger that has allowed a recent bond market rally.
12 | ADMISI - The Ghost In The Machine | May/June 2018
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36
