“La sabiduría de la vida consiste en la eliminación de lo no esencial. En reducir los problemas de la filosofía a unos pocos solamente: el goce del hogar, de la vida, de la naturaleza, de la cultura”.
Lin Yutang
Cervantes
Hoy es el día más hermoso de nuestra vida, querido Sancho; los obstáculos más grandes, nuestras propias indecisiones; nuestro enemigo más fuerte, el miedo al poderoso y a nosotros mismos; la cosa más fácil, equivocarnos; la más destructiva, la mentira y el egoísmo; la peor derrota, el desaliento; los defectos más peligrosos, la soberbia y el rencor; las sensaciones más gratas, la buena conciencia, el esfuerzo para ser mejores sin ser perfectos, y sobretodo, la disposición para hacer el bien y combatir la injusticia dondequiera que esté.
MIGUEL DE CERVANTES Don Quijote de la Mancha.
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13 de septiembre de 2016
Traders Bemoaning Lack of Shock, Awe in Markets Finally Get Some
Friday’s selloff has traits common with past volatility shifts
Investors enduring a third day of elevated turbulence.
Traders
who complained all summer about markets stuck in a zombie state are
getting what they wanted, and probably will be for a while.
Eruptions
of volatility this big rarely go away quickly. By one measure, the
selloff ripping equities represents the sixth most violent rupture to
market calm in history, with the S&P 500 Index’s drop of 2.5 percent
exceeding its daily move in the prior month by a factor of 10. Every
time that happened in the past, turbulence took its time petering out.
Patterns
like that may affirm the view of bears who spent July and August
warning that the peace blanketing everything from equities to bonds and
currencies was likely to end in a bang, not a whimper. Of particular
concern right now is the concerted nature of the selloff in which
markets that don’t ordinarily move in the same direction suddenly are.
“When
investors come back from the beach and start thinking about, ‘How am I
going to prepare for the fourth quarter?’ we’re going to see a lot of
activity,” said Brad McMillan, chief investment officer of Commonwealth
Financial Network in Waltham, Massachusetts, which oversees $100
billion. “Volatility doesn’t go away. It gets stored up.”
Stocks
and bonds plunged in tandem for the second time since Friday, driving
measures of volatility higher as investors lost confidence central banks
still have ammunition to promote growth. U.S. stocks notched their
third straight move of at least 1 percent after 43 days without one,
while Treasury yields were jolted out of the tightest monthly range in a
decade. Oil joined the selloff, punishing currencies of resource
exporters and leaving investors with few places to hide.
Among the pressure points:
Lockstep
drops. A gauge tracking hedge fund strategies that balance bets over
markets, the Salient Risk Parity Index, plunged the most since August
2015 on Friday.
Tepid data. Bloomberg’s index of economic surprises turned negative for the first time since July.
Earnings
estimates. Analysts see S&P 500 profits falling 1.4 percent in the
third quarter, almost double the drop they saw a month ago.
“People
are certainly on edge around here,” said Robert Pavlik, who helps
oversee $9.1 billion as chief market strategist at Boston Private
Wealth. “The one saving grace is that we as a firm have some cash on the
sidelines, but that doesn’t do any good when you’re still 90 percent
invested in equities. You can’t help but feel some pain.”
Two
months of tranquility was pierced Friday when the S&P 500 tumbled
in its worst rout since the U.K. voted to leave the European Union.
Angst as measured by the CBOE Volatility Index climbed 21 percent as of 4
p.m. in New York Tuesday after increasing Friday by 40 percent, its
biggest gain in three months.
Things aren’t any better in the
$13.6 trillion Treasury market. Ten-year notes were stuck in their
tightest monthly range in a decade up until September, while implied
volatility in global currencies was near the lowest this year before
surging at the quickest pace since the June 23 Brexit referendum, a
JPMorgan Chase & Co. index showed.
For bond traders at Pioneer
Investment, the stress represents vindication. The firm has been
betting against longer-dated Treasuries, a losing trade for most of this
year until last week.
“We were very pleased that the strategy
finally seems to be working,” Paresh Upadhyaya, director of currency
strategy in Boston at Pioneer, which oversees about $236 billion. “Is
the global rise in yields a structural change, meaning we’ve seen the
bottoming in yields or is this another head-fake that’s roiled
fixed-income from time to time? This time feels different.”
Stocks
exited the tightest trading range in history last week when European
Central Bank President Mario Draghi downplayed the need for more
measures to boost growth and Boston Fed President Eric Rosengren warned
against waiting too long to raise interest rates. While equities
rebounded after Fed Governor Lael Brainard urged prudence in raising
rates, they succumbed anew Tuesday with valuations sitting near the
highest level in more than a decade.
“Everyone
was out for the summer. Now all of a sudden people are asking ‘Are they
going to raise interest rates?”’ said Bruce Campbell, fund manager with
StoneCastle Investment Management in Kelowna, British Columbia. His
firm manages about C$100 million. “People were running out on Friday,
then they were running back in yesterday, now they’re running for the
exits again today. It’s a crazy, bipolar stock market.”Such
abrupt breaks in calm have not been easily resolved in the past. In the
five prior instances when turbulence spiked as it did Friday, the
S&P 500’s daily swings averaged 1.5 percent in the next 20 days.
That’s 2.5 times the move in the previous 20 days, data compiled by
Bloomberg and Bank of America Corp. show.
Markets
look fragile, Bank of America analysts led by Abhinandan Deb wrote in a
note to clients Tuesday. “We believe a bona fide bond shock remains a
key destabilizing risk to markets, particularly if catalyzed by a loss
of confidence in central banks.”
It’s
been a while since a protracted decline took hold. Following Britain’s
decision to exit the European Union, the S&P 500 dropped 5.3 percent
over two days, only to rally the next four and erase the entire plunge
two weeks later. Two 10 percent corrections that began in August 2015
and January 2016 also proved short-lived.
That’s
not to say that stocks will follow the same route this time. With
S&P 500 profit in the worst decline since 2009 and presidential
elections looming, the list of reasons for the second-longest bull
market to strengthen is getting shorter. While improved economic data
helped fuel the S&P 500’s 20 percent rally from a February low,
signs of weakness are emerging.
All year
bulls have pointed to an element missing from market psychology and
said it would prevent a full-blown selloff -- overconfidence. But signs
of exuberance have been multiplying in the market, including record high
levels of bullish holdings by hedge funds in index futures contracts
and unrepresented short positions in VIX futures.
“There
is just this steady crowding into stocks because that’s the only place
to generate returns. That’s a pretty complacent approach,’’ said Eric
Schoenstein, Portland, Oregon-based co-manager of the $5.4 billion
Jensen Quality Growth Fund. “When you take your eyes off the potential
for risk, that’s when you can really get harmed as an investor.’’