Daily Management Review

SocGen expects volatility leaps in the coming months


04/03/2018


Volatility in the markets can last for a long time, but investors have many ways to prepare for it.



PIX1861 via flickr
PIX1861 via flickr
Société Générale SA's strategists in the second quarter forecast points to "hedging against volatility outbreaks typical for the late stage of the cycle, in credit markets, in dispersion strategies and volatility of all asset classes, as the correlation between shares and bonds itself becomes more volatile."

The strategists warn that technological innovations, such as algorithmic trading, are exacerbating trade problems, and are leading to strong "market liquidity distortions." As an example, the report provides a volatility spiral, observed in early February.

Société Générale notes that in 2018 the net inflow of liquidity provided by all central banks will be negative for the first time since 2009. This will create the prerequisites for a regime change in terms of both correlations and volatility in different classes of assets, as well as premiums for risk.

The Cboe Volatility index jumped 81% in the first quarter. In January, the S&P 500 showed the largest increase in 22 months, as optimism about the tax reform in the US triggered a record inflow into US stocks. However, in early February, signs of increased inflationary pressures provoked turmoil in the markets. As a result, there was a 10% correction.

March did not bring peace to investors. They were concerned about the personnel reshuffle in the White House, the risks of a "trade war" with China and the fall in shares of technological giants on fears of toughening of control by regulators. By the end of the quarter, the S&P 500 has lost 1.2%.

For a long time, fears about an increase in Fed rates are likely to fuel the volatility. In March, the Fed, as expected, raised the federal funds rate by 25 basis points to 1.5-1.75% per annum.

The US Central Bank still expects that the interest rate will be raised two more times in 2018, although some investors believed that the Fed will forecast another three rate hikes this year.

source: bloomberg.com






Science & Technology

Facebook may start production of its own microprocessors

Long-Term Alcohol Monitoring Could Be Possible With A New Injectable Chip Developed By U.S. Researchers

Sweden Now Has The First Electrified Road In The World

Over 270,000 Account Globally Banned From Twitter For Promotion Of Terrorism

Device Capable Of Hearing The Inner Voice Developed By Researchers

New mobile technologies will warn about natural disasters

The brewing industry welcomes blockchain

Asset-Sharing App Of Ryder Is Meant For Commercial Vehicles

Credit Suisse: China will become the leader in AI sphere

Five new technologies that will change the world

World Politics

World & Politics

Debates over Google are heating as a new EU directive is about to be introduced

Will Merkel accept Macron's plans for Europe?

USA and China are pushing North Korea to denuclearization

Germany's dilemma: Will the atomic energy win?

A Forceful Response To Syria Attack Will Be Given By U.S.: Trump

Is Trump’s Maximum Pressure Tactic On North Korea Succeeding Because Of China?

Why are Turkey-EU relations moving back?

Record-Breaking $39 Million raised for Rare Cancer Research in 2018 by Cycle for Survival