Risk On/Off Market Snapshot: August 2013

Despite some big moves (especially the beginning of the month) in several markets such as Crude Oil +2% on three separate days (1st, 9th, and 27th), Grain markets up over 4% on the 26th, 30 Year Bonds seeing some sell offs (down -1.53% on the 1st), and stocks seeing big moves (SP down -1.57% on the 27th, up 1.17% on the 1st), there we no risk on/ risk off days…  as we define it (past performance is not necessarily indicative to future results).

This presents itself as a rather unique situation as there was a pattern of increased volatility in these markets. However, even though the sub-groups (energies, grains, bonds) all moved, they didn’t move together. On a day Crude Oil was up 2.72%, Corn was down -2.51% (the 1st), essentially cancelling each other out.

Typically, this is a performance we’d enjoy watching, as it’s the right environment for portfolios looking for unique trends across multiple markets. But it didn’t bear any fruit in August for whatever reason, and we know the reason. Managed futures don’t just need markets moving on their own – they need them moving on their own in a consistent direction.

Anyway, the continued decline in risk on/risk off days is something that should benefit managed futures over the longer term in our opinion.

Risk OnOff August

(Disclaimer: Past Performance is not necessarily indicative to future results)

For context, the 2002-2008 range of risk on/risk off days was 10% to 20%, which spiked up to 20% to 35% following the financial crisis (’08 to ’12). We define risk on as an average gain of over 1% for “risk” assets; risk off is an average loss of over -1% for “risk” assets. (Click here for a more detailed breakdown.)





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