In his 1933 inaugural address, Franklin D. Roosevelt opened with the famous words: “So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself”. Of course, this was addressed to the general public. Stock market investors should take warning from exactly the opposite message: in stock markets, the only thing we have to fear is… the lack of fear. It becomes especially tricky when advisers start using soothing words to the effect that (extremely) low volatility is nothing to worry about. In one sense, these advisers are right: it is not the low level of volatility that is the problem. It is the complacency accompanying it. History has shown over and over again, that investors were totally caught off guard in situations similar to the current one. Expect the unexpected to happen… soon.
U.S. stocks ended essentially unchanged on Monday. Emmanuel Macron’s expected presidential election victory in France on Sunday, which removed a potential geopolitical risk, took the VIX to its lowest levels in decades (-7.57% at 9.77 points). The Dow added 0.03%, where the S&P 500 was only just in the green (+0.09 points, +0.00%). The NASDAQ touched an intraday all-time high, but ended up ‘only’ 0.03%. UVXY ETFs suffered another loss, because of the easing volatility: -5%. XIV ETNs reached another all-time high at 79.49 points (+2.40%).
Danny Daredevil was the unlucky one among our models: his RSS dropped to 262%. Adventurous Anny was spared Danny‘s suffering, since she holds cash when Danny Daredevil is in possession of UVXY ETFs. Her RSS remained at 22%. Solid Suzy and Lazy Larry continued their good mood of last week and their RSS is closing in on 20%.
None of our models gave a trading signal at the end of yesterday’s session.
RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return
Meanwhile in Japan
The statue of Taira no Kiyomori at Kure Ondo, just before sunset