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Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more.

"... 1 Factor Model:  In the Chart of the Day below we simply show VIX vs S&P500 (S&P500 is inverted on right axis). 


What you’ll simply notice is how simply effective it is to take down gross exposure and tighten net exposure when VIX goes <13.   


Global risks haven’t “greatly moderated” so building exposure into VIX 10/11/12 embeds the assumption that those risks cumulate latently with no impact on risk premiums or prices.  That seems like a pretty heroic assumption."

CHART OF THE DAY: What Happens To S&P 500 When VIX Is Below 13 - 7 22 16 CoD2