Warnings Lights: To See or Not to See Volatility


The Fed’s policy of quantitative easing has artificially suppressed volatility and in doing so, prevented an important warning signal from informing investors. Worse, depressed volatility has essentially forced many active investors to take directional bets which further distorts the volatility signal. Investors should be aware that this important warning signal is not working right now and should manage equity allocations accordingly,

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