Second Quarter Strategy Review
No one wants to be a contrarian just for the sake of being one but right now it might pay to take advantage of the volatility. It feels like everyone involved in capital markets has turned more negative. While the investment outlook does feel a little less certain given the headlines on protectionist trade issues and foreign investment limitations on sensitive US technology that has resulted in a spike in volatility, volatility was at 20-year lows so some level of normalization should probably be expected. In Exhibit 1, we compare volatility as measured by the VIX, commonly referred to as the Fear Index, to high yield credit spreads (the interest rate demanded by investors in high yield bonds over similar maturity investment grade or government bonds).