Week Ahead: Risk Premias and Alpha Generation
Managing exposure
Intro:
After spending the weekend rethinking and reanalyzing things I want to reframe things marginally and explain how I am thinking about running trades for the next 4 weeks.
Main idea: macro volatility is back and this will require further active decisions in order to outperform broad beta. Additionally, it will be incredibly important to be nimble over the next 4 weeks. For example, we had an incredibly strong rally in oil during an overnight session that immediately reversed the next day. The same thing happened for stocks and bonds. These TYPES of move are incredibly high frequency and require split-second decisions to actively take advantage of them.
Contextualize The Macro Regime:
I laid out the macro tensions in this report:
Interest Rate Report: Volatility!
Hello everyone, The most recent CPI print has caused a significant change in markets that needs to be contextualized correctly. Cross-asset volatility has increased as positioning is shifting. The S&P500 broke the 5200 level and the macro moves are only just beginning. No one is ever prepared for macro vol because they are so focused on their individual…
I want to explain several things:
First, 2s10s remains inverted and has not steepened in the same way Z4Z5 SOFR has steepened:
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