walkitout (walkitout) wrote,

I Love All the Fancy Explanations That Amount To, Dude, August


In this explanation, a bunch of technical traders are blamed for the crash last month.

"Risk parity funds build portfolios around risks: They target a certain exposure to volatility, rather than, say, equities or bonds. That means that when volatility spikes, they sell automatically and indiscriminately.

CTAs meanwhile are typically trend followers, meaning they buy when others are buying and sell when others are selling."

Translation: August is a month when everyone is on vacation and trading is very light. In any other month, kooky stuff gets swamped -- it's noise on top of a lot of signal. But in August, there is no signal, because the signal has gone to the beach.

Explanation for why things will improve?

JPMorgan is quoted: "We don't expect a period of prolonged stress as market volatility normalizes and these technical flows subside."

But that's just a fancy term for, everyone is back from vacation because it isn't August any more.
Tags: economy
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