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."