UBS On-Air: Market Moves
Top of the Morning: CIO Strategy Snapshot - Sources for volatility
Oct 14, 2024
Jason Draho serves as the Head of Asset Allocation Americas at UBS Chief Investment Office, specializing in asset allocation and market analysis. He dives into potential sources of market volatility, from economic data uncertainties to Fed policy and the upcoming U.S. election. The conversation highlights the strategic use of options trading and recent economic indicators like CPI and PPI. Draho also discusses China's cautious fiscal plans and explores promising sectors, alongside fixed income and alternative investments like oil and gold for stability.
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Quick takeaways
- Heightened market volatility is anticipated due to uncertainties around U.S. election outcomes and upcoming Federal Reserve policy decisions.
- Positive early indicators from Q3 earnings suggest growth potential, yet challenges remain in meeting high consensus forecasts for future quarters.
Deep dives
Market Volatility Outlook
The S&P 500 has hit an all-time high recently, indicating a seemingly strong market, yet volatility remains elevated, with the VIX index over 20. There is an expectation of increased market fluctuations in the coming weeks driven by uncertainties surrounding significant events, including the upcoming U.S. election and Federal Reserve policy meetings. Investors are cautious, which is reflected in their choice to utilize options for both upside exposure and downside protection, resulting in higher implied volatility. This discrepancy between implied and realized volatility emphasizes the market's apprehension about imminent economic developments and election outcomes.
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