November Rally Weighs on Low-Volatility Funds

Nov 11, 2019

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November Rally Weighs on Low-Volatility Funds
Gunjan Banerji – WSJ
Investors are dumping strategies often tapped for protection—like exchange-traded funds promising lower volatility—the latest sign that they are embracing riskier assets once again.
Fading fears about a looming recession have buoyed stocks in recent weeks, sending the S&P 500 on a five-week winning streak and back near a record. As investors turned to stocks they dropped traditionally safer investments like Treasurys, sending the yield on the 10-year note to the highest level since July last week as bond prices fell. Some investors have also fled exchange-traded funds that promise to shield them from market swings.

More pain ahead for consumer stocks, says top technical analyst
Tyler Bailey – CNBC
After outpacing the broader markets for most of the year, the consumer trade is starting to show some cracks.
The Consumer Staples ETF XLY is up more than 22% in 2019, but as of Friday’s close, more than half of the stocks in the sector found themselves in correction territory. According to Cornerstone Macro Head of Technical Analysis Carter Worth, more pain is on the way for this sector.

ETF assets rise to a record $4 trillion, and it’s still ‘early days’
Lizzy Gurdus – CNBC
Call it an ETF explosion.
U.S.-based exchange-traded funds have racked up a record $4 trillion in assets under management as of this year, with 136 ETF providers offering 2,062 ETFs to investors, according to research firm ETFGI.
Overall, ETFs are seeing huge interest globally, and that’s unlikely to die down anytime soon, says Deborah Fuhr, founder of ETFGI and a leading expert on the ETF industry.


SGX reports market statistics for October 2019
Singapore Exchange (SGX) today released its market statistics for October 2019. Asian equity market activity was marked broadly by a return of investor risk appetite during the month, amid signs of progress in U.S.-China trade negotiations and easing uncertainties over the path ahead for Brexit.
Total securities market turnover value on SGX rose to S$21.6 billion in October, rebounding by 9% month-on-month (m-o-m). Securities daily average value climbed 4% m-o-m to S$980 million while market turnover value for exchange-traded funds (ETFs) surged 55% m-o-m to S$236 million.


The Need for Speed
Joe Lichtenberg – TABB Forum
The need for speed in today’s business environment has made high-performance in-memory databases popular. But that high performance comes at a cost.


Allianz Global Investors Boss Andreas Uterman to Retire in January
David Ricketts – Barron’s
Allianz Global Investors chief executive Andreas Utermann is to step down from his role after eight years running the EUR557bn (approx US$615) asset manager.
Utermann, who took sole charge after former co-head Elizabeth Corley stepped back in 2016, will retire on January 1, 2020, according to a statement. Tobias Pross, global head of distribution, will become AllianzGI’s (ticker: DRGTX) new chief executive. Pross has been a member of AllianzGI’s global executive committee since 2015.


2 Options Indicators Signaling a Pullback
Matthew Timpane – Schaeffer’s Investment Research
The S&P 500 Index (SPX – 3,093.08) has been in a rapid ascent since breaking out. Moreover, it’s brushed off headline risks as of late pertaining to the U.S.-China trade war and impeachment inquiries. So, should we be asking ourselves, “Are we once again climbing a wall of worry?” as the market often likes to do? Maybe… structurally, the market looks solid from a technical perspective. After a 21-month consolidation in a secular bull market, we’re back in blue-sky territory, so why isn’t everybody celebrating? Likely, because there are some real risks out there from an economic perspective. Also, because investors are sitting on a large pile of cash that is not participating in the recent move, and fortunately for them, this market has the potential for a bullish pullback, in our opinion.

VXX: Record Bearish Bets On VIX Futures Create Opportunity
Josh Ortner – Seeking Alpha
Future contracts that track and measure the S&P 500’s implied volatility, also known as the “fear gauge”, hit record lows just last week. The net non-commercial position long contracts outstanding less short positions, sank to a minus 187,948 last week, its lowest level ever. In a nutshell, investors and speculators are betting on the VIX going lower while guessing that stocks will head indefinitely higher. As a professional investor myself, its very common to see investors pile on trades that are working in the short-term. This creates opportunity for savvy investors who understand the benefit of purchasing insurance hedges or options on the VIX to protect their assets. This article will discuss the opportunity in purchasing VIX futures right now as either a hedge against all your holdings, or just a short-term mean reversion trade.

Traders Least Bearish on Rand in 13 Years as Moody’s Priced In
Colleen Goko – Bloomberg
Most analysts may be predicting South Africa will lose its last investment-grade rating, but derivatives traders couldn’t care less.
Their bearish bets on the rand, measured by risk-reversal contracts, have fallen to the lowest level since before the 2007-08 global financial crisis. The premium of options to sell the currency in the next six months over those to buy it, known as the 25 Delta risk reversal, dropped to 2.42 percentage points on Friday, extending its fall this year to 1.2 percentage points.

Funds are starting to turn more bullish on copper
Andy Home – Reuters
Whisper it softly, but there are the very first signs that funds are turning more friendly to Doctor Copper.
London Metal Exchange (LME) copper has been locked into a sideways trading pattern since the middle of the year with robust internal dynamics swamped by the broader, negative macro story.

Gold Trade Equal to 3 Million Ounces Sends Futures Tumbling
Luzi-Ann Javier – Bloomberg
Gold futures tumbled to a three-month low as contracts equal to over 3 million ounces changed hands in half an hour, fueling the sell-off.
In the 30 minutes ended 10:30 a.m. in New York, 33,596 contracts were traded, more than triple the 100-day average for that time of day. That helped pushed the most active contract to as low as $1,448.90 an ounce, the lowest since Aug. 5.

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