Newsletter

This issue compares the traditional Volatility Index (VIX) with the Turbulence Index (TI), emphasizing why the latter offers a structurally richer signal for portfolio risk management. While the VIX gauges expected volatility, the Turbulence Index measures statistical unusualness—accounting not only for magnitude shifts but also for breakdowns in asset correlations. The distinction is non-trivial. In crises, correlation behavior changes before volatility spikes. This newsletter outlines the academic foundations, empirical validation, and practical advantages of TI over VIX for modern portfolio construction. The Conceptual Gap: Why VIX Isn’t Enough The VIX, widely interpreted as the “fear gauge,” reflects the market’s consensus on future volatility. Yet its scope is univariate: it focuses exclusively on the magnitude of expected price fluctuations, neglecting how assets behave in relation… Read more

The U.S. moves toward taxing foreign capital — and it’s not just about politics The “One Big Beautiful Bill” (OBBB), recently passed in the U.S. House and now pending Senate review, contains a little-known clause — Section 899 — that could have disproportionate market consequences. While its political message is loud, its financial implications may speak even louder: a structurally weaker dollar and a reassessment of U.S. asset exposure by global investors. From Tariffs on Goods to Tariffs on Capital Section 899 introduces a framework for taxing passive income (such as dividends or interest) earned by foreign investors in U.S. assets — but only if those investors are based in jurisdictions that Washington deems “discriminatory” toward the U.S. (i.e., countries with digital services taxes… Read more

Despite a significant -9% depreciation since January, the U.S. dollar appears poised for further downside. While short-term technical signals may hint at a tactical bounce, deeper structural imbalances suggest the longer-term path remains lower. Historical overvaluation, shifting global portfolios, and weakening U.S. growth prospects all conspire against a sustained dollar recovery. The overvaluation legacy Historical context offers a sobering lens. According to Federal Reserve data, the dollar remains nearly two standard deviations above its real effective exchange rate average since 1973. Only two other periods—mid-1980s and early 2000s—saw similar excesses. In both cases, the dollar subsequently fell by 25–30%. The current setup, while not a crystal ball, bears unmistakable resemblance. Portfolio rebalancing: the quiet giant The scale of global exposure to U.S. assets is… Read more

Background: Trump’s Announcements and Market Volatility Between 2017 and 2021, President Donald Trump’s public statements – from tweets to official policy announcements – became notorious for moving financial markets. Traders and analysts closely watched Trump’s Twitter feed and press remarks for clues, as even a single tweet could whipsaw stock prices or bond yields. Two key gauges of market fear and volatility often referenced in this period were: Trump’s term saw dramatic swings in both indices, frequently in reaction to his policy decisions on trade, Federal Reserve commentary, and later the COVID-19 crisis. This raised the question: Did Trump and his administration time their market-moving announcements strategically? Observers have speculated that provocative announcements often came during calm markets, whereas reassuring messages were deployed amid… Read more

The equity rally in Europe throughout 2024 and early 2025 has proven as short-lived as we expected—confirming the fragilities we consistently flagged (see our May 2024 newsletter: link). The latest downturn, deepening in recent days, is politically triggered rather than driven by endogenous economic weakness. This episode illustrates not only the cost of chasing momentum at the wrong time, but also the real pain of following the crowd: portfolios that paid performance fees are now left with sunk costs. European bond market volatility, meanwhile, represents tactical opportunity rather than systemic risk. On the systemic front, our internal models detect no structural distress for now. Finally, we are reactivating our deep value framework—recently upgraded with the latest academic insights—to reposition equity exposure with a strategic… Read more

Despite persistent policy uncertainty under the new US administration, the foundational drivers of US economic preeminence remain intact. Structural advantages—such as labor market flexibility, institutional resilience, and innovation capacity—continue to support growth. However, rising tariffs and political volatility have slightly reduced GDP forecasts and temporarily lifted inflation expectations. Equity investors should closely monitor momentum indicators, with selected re-entry points likely to emerge in the coming months. US Equities: Strategic Reassessment and Re-entry Framework While we maintain our constructive stance on US equities—underpinned by GDP growth in the 1–3% range, historically associated with positive equity returns—we are currently adopting a more tactical approach. We remain selective both picking names and entry levels. Recent underperformance aligns with patterns seen in past temporary dislocations, not structural shifts…. Read more