The drop in market gyrations has triggered a buy-signal for certain computer-driven strategies
Broadly known as systematic strategies, these funds have been scooping up between $1 billion and $2 billion a day in U.S. stocks, according to BNP Paribas estimates, helping drive an equity rally that has come despite worries that a hawkish Fed will plunge the U.S. economy into recession.
Of course, the market will have to navigate a plethora of risks ahead - most prominently the Fed, which concludes its monetary policy meeting on Wednesday. Signs that the central bank is unlikely to pull back on its hawkish monetary policy outlook despite evidence of slowing inflation and softness in the economy could exacerbate recession fears and reignite volatility, forcing the funds to taper purchases or even start selling.
“As we think that technical factors may have played a large role in the market performance so far this year, we expect this to eventually wane as fundamental factors resume the dominant position as market drivers,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note on Tuesday.Investors said conditions were supportive of a rally at the beginning of the year. The S&P 500′s 19.
Grinacoff, of BNP Paribas, estimates volatility control funds have assets of about $275 billion, while CTAs, not all of which have a volatility control strategy, as a group have $800 billion allocated across strategies.
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