Prices at the Pumps - April 17, 2024 #saltwire #energymarkets #pricesatthepumps #gaspricesNEW YORK - Volatility-linked investment strategies are joining the nascent sell-off in U.S. stocks and could help accelerate declines if market gyrations keep increasing.
"Their positioning is clearly above average,” said Parag Thatte, a strategist at Deutsche Bank."There is room for them to pull back in terms of exposure." The market's recent swings were preceded by a long period of calm in which investors piled in to equities, driven by evidence of strong-yet-stable economic growth and expectations that the Fed would deliver several rate cuts this year. The VIX has not risen over the 20 mark - a level associated with healthy demand for portfolio hedges - for 120 sessions, the longest such streak since 2018.
"The volatility increase we're seeing is across asset classes," said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets."I think it is the market waking up to potential downside risk." Volatility control funds have a relatively short fuse compared with other computer-driven strategies, making them among the first to react when the market landscape changes.
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