The Epsilon Theory Archive

“History doesn’t repeat itself, but it often rhymes.” Mark Twain said that, or Abraham Lincoln depending on what corner of the internet you find yourself on any given day. Likewise, there are common themes, topics and subjects that run throughout the Epsilon Theory archive. All of our writing is categorized, tagged and organized to be easily accessible, but beware: your search for truth on one matter may very well lead you down any number of rabbit holes (and we hope that it does).

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Two negative narratives have derailed the ebullient markets of January — Inflation and Trade War. While I think both are here to stay, I’ve trained the Narrative Machine on inflation first because it’s more critical for investors. Here are the results, and to quote Game of Thrones — Inflation is Coming. Read more »

quant

Correlations are dropping among all asset classes, possibly indicating a decreasing strength in the macro rate and inflation drawdown. Read more »

quant

Short-term correlations are declining, indicating the rate and inflation driven market is playing a smaller role. Read more »

podcast

On this special episode of the Epsilon Theory podcast, we share an excerpt from a conference call we recorded on February 13 discussing our thoughts on the market selloff earlier in the month. Listen »

note

Most investors think that fundamentals are sound. Most investors think that other investors think that last week's correction was about vol-selling, vol-targeting and algos run amok. But neither of those is the real story. The real story is that everybody knows that everybody knows that inflation will change the way portfolios are built and managed. Read more »

quant

Short-term correlations have risen, likely indicating a strengthening macro environment for rates and inflation. Read more »

quant

Correlation across asset classes remain unchanged from last week, but are still lower than they have been in recent months. Read more »

quant

Correlation declined a bit across most asset classes, which is contrary to the building macro strength for increased inflation and increased rates.  Read more »

quant

Correlations moved higher over the week, we think this is likely indicating strength of macro events such as increased rates and increased pressure on inflation. Read more »

quant

Momentum

Short-term stock momentum is picking up, as in energy and metal commodities, while developed country bonds are slipping.  Read more »

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