Everyone has his day

Everyone has his day

When listening to the financial media, you would think nothing happened in 2017. The equity market went up in a low volatility fashion – again. Commodities remained out of favor. Interest Rates remained low and there was little worry of inflation.

But the reality is 2017 was indeed a year of massive change and new experiences.

It started with a president inaugurated in the US to which many believed would cause the market to tank and usher in enormous volatility – it didn’t happen.  In fact, Q1 was amongst the lowest volatility periods ever experienced even in markets like energy futures. Many talking heads said oil would be “lower for longer” and $40-50 was the new paradigm – yet we ended up at $60. The demand from China and India is significant and China is now the largest global importer.

Curiously, despite the lack of inflation, the Fed indeed started raising rates. Canada followed suit in July, the first in seven years. The year ended with Bank of England Governor Mark Carney warning inflation had hit its highest point in 5 years. Rhetoric around the topic highlights that the short term risk of inflation may be low, but a possible cause for concern in the long term.

Marijuana stocks started as water cooler conversations and then eventually dominated the media. Then to take it to the next level, cryptocurrencies including Bitcoin began to soar and there was a new conversation to have. Both had loads of volatility that have been missing from traditional assets.

While the crowds of sage investors shyed away from the cannabis conversation they had lots to say about Bitcoin with the famed Charlie Munger from Berkshire Hathaway calling it “total insanity”. He said it produces no earnings, and cannot be valued. It sounded a lot like Julian Roberson missing the dot com bubble in early 2000.

What does it all mean?

Nothing stays the same. The volatility shifted from places we typically look, to new places.  And it will likely shift again. Expect higher volatility.

Things that did stay the same, or same direction and low volatility, are the things you need to think about. 

It reminds me of a quote from Winston Churchill: “Everyone has his day and some days last longer than others.”



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Auspice Managed Futures Excess Return Index (AMFERI): The Auspice Managed Futures Index aims to capture upward and downward trends in the commodity and financial markets while carefully managing risk. The strategy focuses on Momentum and Term Structure strategies and uses a quantitative methodology to track either long or short positions in a diversified portfolio of exchange traded futures, which cover the energy, metal, agricultural, interest rate, and currency sectors. The index incorporates dynamic risk management and contract rolling methods. The index is available in total return (collateralized) and excess (non-collateralized) return versions.

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