Top Traders Unplugged SI355: Drawdowns Don’t Lie, But They May Mislead ft. Alan Dunne
19 snips
Jul 5, 2025 Markets have rebounded quickly, but underlying factors raise questions. The bond market’s resilience amidst deficits and volatility’s impact on asset prices are scrutinized. Key insights delve into the misconceptions surrounding drawdowns and the illusions of diversification. The interplay of liquidity, macro policies, and risk management is dissected, revealing the challenges investors face today. Geopolitical events and their effects on market dynamics emphasize the need for adaptive strategies in uncertain times.
AI Snips
Chapters
Transcript
Episode notes
Fast S&P 500 Recovery Observed
- The fastest recovery from a 20% drawdown for the S&P 500 was 57 days, faster than during COVID or the 1998 crisis.
- Both prior rebounds coincided with aggressive Fed stimulus, but the recent rebound occurred with minimal direct stimulus.
Bond Market Calm Amid Rising Deficits
- Despite large fiscal deficits and political reluctance to address them, bond yields have not spiked as expected.
- Structural trends and fiscal pressures still point to higher bond yields over time, despite short-term calm.
Trend Following Drawdowns Are Normal
- Trend following experiences normal statistical drawdowns, consistent with historical data, despite recent struggles.
- Market choppiness and erratic policy create difficult environments, but drawdowns don't indicate structural failure.