Sample Reporting Package

October 2021

October began with fears of China Evergrande’s default triggering a financial crisis.  Stocks sold off in early October with option premiums rising in anticipation of a potential multi-sigma move.  The feared Lehman 2 moment didn’t materialize and for the rest of the month, stocks rallied strongly and option premiums sold off precipitously.

The fixed income sector continued its downward march in October with inflation fears weighing heavily on investors.  In late October we witnessed a VAR shock in the Australian and Canadian short end with the Australian 2-year yield jumping from 0.12% to 0.62% in three days.  The calm expressed by the low implied volatility in stocks contrasts glaringly with the fear communicated by the near yearly high fixed income implied volatility.

On the performance side, October ended up slightly with fixed income trading up and FX trading down.  Our models were positive in US fixed income and flat in Europe.  Machine learning and contrarian families were able to profit from the relatively volatile US fixed income.  It was more of a mixed performance in European fixed income, although the contrarian family profited there as well. Our momentum models and longer-term models were positioned for further rises in rates toward the end of the month, but long rates actually fell somewhat during the last few days of October and we gave back some earlier profits there.

The breakout in the Japanese Yen to multi-year lows was positive for our models.  Machine learning, breakout and momentum families fared well in Yen.  The Euro, however, was a different story.  After making new lows in September, it spent all of October trading around the 1.16 level.  The relative lack of movement and direction proved difficult for ML, breakout and momentum families.  Other currencies were similar to Euro and ended slightly down as well.

The seemingly incongruent spread between equity and fixed income implied volatility plus the recent breakdown in the once very stable short-end of the curve makes for a very interesting finish to 2021.