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 7, 2017
Category: Quantitative Insights
Tags: income, bull market, Treasurys, stocks, yields, growth, curve, sychronous

The 10-year Treasury yield fell to 2.24% and continued to flatten after a period of steepening over the past several weeks. While parts of the U.S. market hit all-time highs, the growth in stocks was not as synchronous as it has been this year. We think this might be a signal that the bull market is maturing.

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Volatility | August 3, 2017

Author: Nathan J. Rowader
Date: August 3, 2017
Category: Quantitative Insights
Tags: momentum, volatility, commodities, inflation, decline

Overall, volatility stayed stable during the week with near-term and long-term volatility fairly close to each other. Consistent with a change in momentum, the volatility of commodities did decline and was slightly below long-term trends. We think this might be the beginning of some potential inflation.

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 2, 2017

Author: Nathan J. Rowader
Date: August 2, 2017
Category: Quantitative Insights
Tags: correlation, trend, stocks, reflation, rising interest rates, sectors, regions

The correlation among stocks rose over the past week as the reflation theme that dominated early this year appeared to reassert itself. This creates a macro theme of rising interest rates and strength in inflation sensitive sectors and regions. We think it is important to keep an eye on rates for further indications of this trend.

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 1, 2017

Author: Nathan J. Rowader
Date: August 1, 2017
Category: Quantitative Insights
Tags: momentum, commodities, energy, bonds, trend, emerging markets, stocks, oil, expansion

Overall, July was very positive for stocks and fairly weak for bonds. Globally, much of near-term momentum has been driven by emerging markets. This trend has been persistent all year and we think it is likely to continue. Surprisingly, commodities have recently turned around, particularly in energy and more specifically oil. This could just be a bounce off the bottom, but it is consistent with an expanding global economy.

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 | July 31, 2017

Author: Nathan J. Rowader
Date: July 31, 2017
Category: Quantitative Insights
Tags: trading, rates, trend, reflation, Treasury

The 10-year Treasury rate rose, ending the week at 2.32%. This week did see a push higher in many of the reflationary sectors that dominated the early part of the year. Should this trend continue, we expect rates to break out of the recent trading range.

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Volatility | July 28, 2017

Author: Nathan J. Rowader
Date: July 28, 2017
Category: Quantitative Insights
Tags: volatility, equities, short term, long term, Asian

Short-term and long-term volatility are still in line with one another, not really signaling a move one direction or the other. However, there has been an uptick in volatility throughout major Asian markets, but, again, this is at levels that are historically low and not likely a signal of a major change in direction.

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 | July 27, 2017

Author: Nathan J. Rowader
Date: July 27, 2017
Category: Quantitative Insights
Tags: correlation, short term, Treasury, macro, increased rates

Correlations among asset classes increased over the short term, which may indicate a renewed strength in macro issues likely stemming from broad based signaling of increased rates. While rates didn’t move very much over the past week, we think the overall range of trading will signal to markets what sort of macro events are driving the market. We think it is helpful to keep an eye on key benchmark rates such as the 10-year Treasury.

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 | July 26, 2017

Author: Nathan J. Rowader
Date: July 26, 2017
Category: Quantitative Insights
Tags: momentum, energy, equities, rebound, emerging markets, European

Near-term momentum in the major European markets shifted negative on weaker earnings, mostly resulting from a stronger Euro which some may see as a competitive weakness. Meanwhile, emerging markets and energy continue to strengthen in the near term with energy signaling a possible rebound.

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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