Swensen of Yale Endowment: Low Market Volatility a Worry

David Swensen, chief investment officer of Yale University’s endowment fund, is concerned that low market volatility could lead to another market crash, according to a recent Bloomberg article. During his remarks at the Council on Foreign Relations in New York earlier this month, Swensen said, “When you compare the fundamental risks that we see all around the globe with the lack of volatility in our securities markets, it’s profoundly troubling.” According to the article, Swensen’s investment strategy of shifting away from U.S. stocks to alternative investments (including private equity) has been widely copied and has generated billions for the university […]

Low Volatility Could Be a Safety Net

The CBOE Volatility Index (VIX) has been well below its long-term average (of around 20), according to a recent article in Barron’s, which suggests that this might not necessarily be a bad thing for the stock market. The article says that, given the world’s current state of chaos, we might expect volatility to be higher. But the VIX, it says, is based on investors’ perceptions of “perceived certainty—or lack thereof”—regarding future returns,” adding that analysts are expecting continued growth in corporate earnings. Such a consensus bodes well for the VIX to stay low, the article argues, citing findings by Nomura […]

A Trader Betting on Market Turmoil

While betting against market upset has been “one of the longest-running and most profitable trades in recent financial history,” hedge fund manager Christopher Cole is “arguing with the passionate intensity of a true believer that this market calm cannot last.” This according to a recent article in The New York Times. Cole, chief of Artemis Capital (which manages about $200 million) says, “Optically, volatility is still very low, but fear is increasing.” The article cites a parallel between Cole’s stance and the sentiment preceding the stock market crash of 1987, “when investors were similarly lulled into believing that volatility would […]

Jason Zweig: Prepare Rather Than Worry About Increased Volatility

The low volatility currently seen in the market is causing concern for many portfolio managers, according to a recent Wall Street Journal article by Jason Zweig. Zweig says many investors share the view of portfolio manager Brian Singer of William Blair & Co. who argues: “The global market’s ongoing low volatility should be unsettling for investors.” And, while Zweig conceded that the VIX (CBOE Volatility Index) is “brushing lows set nearly a quarter-century ago,” he’s not convinced that the worry is warranted. He points out that the VIX is only about 30-years old and that stocks have “fluctuated in a […]

The Market is Calmer than it Seems

Last year’s Brexit vote and presidential election results upset the stock market apple cart, giving hope to hedge fund managers and mutual fund stock pickers who claim that underperformance has been partly because “stocks have moved in lockstep.” However, according to an article in last week’s Wall Street Journal, the argument doesn’t really hold water. The “frenetic trading” in the weeks following each of these momentous events has given way to “remarkably muted” swings in share prices, the article says, and adds up to “continued frustrations for traders who seek to exploit rising volatility.” While stocks have risen to record […]