Quantitative Insights

To understand the impact of catalytic narrative forces, we have to monitor the vital signs of the capital markets they affect. To analyze the big picture through the lenses of game theory and history, we must also examine the details through lenses like volatility, momentum, income, correlation and inflation. These are the indicators of systemic vitality and stress—the fine details we use to fine-tune our worldview. We hope they help you sharpen your understanding of the investable universe.

Author: Nathan J. Rowader
Date: August 21, 2017
Category: Quantitative Insights
Tags: income, Treasurys, pullback, risk assets, stocks, yield, seasonal

The 10-year Treasury yield declined further this week, ending at 2.19%. Stocks also continued their bumpy ride this past week. We think the pullback in stocks might just be seasonal as overall the trend for risky assets still leans positive.

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Author: Nathan J. Rowader
Date: August 17, 2017
Category: Quantitative Insights
Tags: volatility, commodities, stocks, short term, long term, reflation

Overall, volatility for both the short term and long term remains relatively unchanged and near all-time lows. Low volatility indicates that stocks and commodities should continue to grow and is supportive of the reflation theme that is beginning to reassert itself.

Market volatility is an indicator of financial stress. Low or declining volatility environments may indicate favorable periods for equity investments, whereas rising volatility periods may favor sovereign debt and developed market currency exposure.

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Correlation | August 16, 2017

Author: Nathan J. Rowader
Date: August 16, 2017
Category: Quantitative Insights
Tags: momentum, interest rates, correlation, reflation, macro

Correlations continue to rise, indicating a strengthening macro trend likely related to falling interest rates. This correlation trend is counter to the idea of a reflation trade, which is showing up in momentum trends. This could be an important indicator, but it will require some type of confirmation across different indicators before we can draw any conclusions.

The correlation figure measures how each asset return moves in relationship to the broader basket of asset returns listed on the X axis. When correlations are high or rising, it may indicate that economic movements and sentiment are driving the majority of returns, which could potentially make security selection challenging.

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Momentum | August 15, 2017

Author: Nathan J. Rowader
Date: August 15, 2017
Category: Quantitative Insights
Tags: momentum, energy, metals, stocks, short term, long term, reflation, reversal

Despite a pullback in stocks last week, short- and long-term momentum are still not signaling a reversal in trend. Additionally, energy and metals are starting to point to a positive trend which may add strength to a new reflation trend.

Momentum measures the rate of acceleration, either positive or negative, in a security’s price and may indicate which markets are positioned for gains or losses. Investing based on momentum entails establishing long positions in securities with positive recent returns and short positions in those with negative recent returns. Momentum in asset classes may illustrate the development of trends in the market.

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Income Report Card | August 14, 2017

Author: Nathan J. Rowader
Date: August 14, 2017
Category: Quantitative Insights
Tags: income, volatility, Treasurys, risk assets, stocks, drawdown

The 10-year Treasury finished the week at 2.20%, which is one of the lowest points of the year. This coincided with one of the largest declines in the stock market as well. As September comes into view, it is likely market volatility will continue. However, given overall market strength, we think risk assets should remain in favor.

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Volatility | August 10, 2017

Author: Nathan J. Rowader
Date: August 10, 2017
Category: Quantitative Insights
Tags: volatility, risk, bull market, low levels

Overall market risk continues to stick near the multi-year low levels. The persistence of low volatility may add some reassurance that the bull market is still firmly in place.

Market volatility is an indicator of financial stress. Low or declining volatility environments may indicate favorable periods for equity investments, whereas rising volatility periods may favor sovereign debt and developed market currency exposure.

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Correlation | August 9, 2017

Author: Nathan J. Rowader
Date: August 9, 2017
Category: Quantitative Insights
Tags: interest rates, correlation, inflation, risks, asset class

Correlations are on the rise in nearly every asset class. We think this is likely due to the reemergence of interest rates and inflation as a core driver of market returns. Rates in the U.S. continued their decline this past week which may lead most investors to ignore any potential inflation risks on the horizon.

The correlation figure measures how each asset return moves in relationship to the broader basket of asset returns listed on the X axis. When correlation ns are high or rising, it may indicate that economic movements and sentiment are driving the majority of returns, which could potentially make security selection challenging.

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Momentum | August 8, 2017

Author: Nathan J. Rowader
Date: August 8, 2017
Category: Quantitative Insights
Tags: momentum, equities, tech, growth, Dow Jones, synchronous

As the Dow Jones broke records, tech-related markets slowed down slightly. This may just be a single data point but when markets are not synchronous in their growth, it tends to indicate a change in leadership. We think it may be important to keep an eye on the growth patterns going forward.

Momentum measures the rate of acceleration, either positive or negative, in a security’s price and may indicate which markets are positioned for gains or losses. Investing based on momentum entails establishing long positions in securities with positive recent returns and short positions in those with negative recent returns. Momentum in asset classes may illustrate the development of trends in the market.

See the data