• Avoid This ‘Bearish Black Hole’ → Get Our Favorite ETF Ideas

    We warned investors about a “black hole of risk.” It’s here. Prepare yourself for what comes next. Get our Macro team’s favorite ETF ideas (and risk management levels) with 30-days free of “ETF Pro Plus.”

Editor's Note: Below is a brief excerpt from today's Early Look written by Senior Macro analyst Darius Dale. Click here to learn more about the Early Look.

... Consider the following asset gathering entropy as well:

“BlackRock estimates that there are $1.9tn of assets in dedicated factor strategies and predicts this will swell to $3.4tn by 2022.” (SOURCE)

Obviously, quant behemoths AQR and RenTech are included in that calculus. It’s unclear, however, whether or not BlackRock includes the $100-200 billion in AUM at multi-manager, largely market-neutral (or some version of that) hedge funds in their calculus given their daily need to delta hedge factor exposure risk.

Regardless, we are all aware of the large quantity of leverage such strategies employ and how their decisions to gross up/down sectors and style factors contributes to market volatility – the same volatility you’ve seen on your screen throughout this #Quad4 “hurricane”.

CHART OF THE DAY: The Machine Is Perpetuating #Quad4 Volatility - Chart of the Day

CHART OF THE DAY: The Machine Is Perpetuating #Quad4 Volatility - early look