Asymmetric Investment Returns is a blog authored by Mike Shell since 2006, covering topics about asymmetric investing and trading for asymmetric risk/reward in pursuit of asymmetry.
After a central bank increases interest rates the economy often enters a recession in the years that follow. Historically bonds have performed well whether a recession occurs or not.
Navigating volatility through the lens of the VIX and SPX options presents tactical investment managers with unique opportunities. By understanding the asymmetries in risk and reward, traders can position themselves to capitalize on volatility while effectively managing downside risks. Continuous monitoring of market conditions and adaptability in strategy will enhance the ability to thrive in volatility-driven environments.
Tactical investment managers should be mindful of how these shifts in unemployment rates can impact various sectors. Historically, lower interest rates can lead to increased market activity, particularly in interest-sensitive areas such as real estate and consumer discretionary spending.
The relationship between the VIX and SPX options is a cornerstone of effective risk management in trading and investment. By understanding this dynamic, traders can better anticipate market movements, implement strategic hedging techniques, and optimize their portfolios for changing volatility conditions. Monitoring market indicators and employing various trading strategies based on this relationship can significantly enhance your risk management practices.
For asymmetric investment returns, when examining the yields on the long end of the yield curve, it's essential to consider three critical factors: growth expectations, inflation expectations, and term premium. Each of these elements plays a significant role in determining the equilibrium yield for long-term bonds.
Despite the Federal Reserve (Fed) lowering interest rates, the ICE US Treasury 20+ Year Index has declined -7.2% from its recent peak a few weeks ago.