Market Commentary

Its Quiet Out There.

12/15/2024

There's a great line from 80's action movies: “It’s quiet out there, too quiet.” This sentiment pretty much sums up the current state of equity market volatility as we approach the year's end. It fees like the prevailing mood among traders is complacency, evidenced by an endless stream of analysts promoting positive seasonal charts, the Santa Claus rally and declaring that "volatility is dead".

We frequently remind our investors that volatility is mean-reverting, which means it swings between extremes rather than settling in the middle. A key sign of this complacency is the current level of the Volatility Index (VIX), showcasing an unprecedented VIX call skew. Additionally, hedge funds are near record levels of leverage, which could magnify any downside should volatility return. These factors, among others, signal a potential spike in volatility.

VIX Near Complacency Levels

Source: Goldman Sachs

Hedge Fund Net Leverage Reaching Extremes

Source: JPMorgan

Hedging Exposures

To clarify, this isn't a prediction of an imminent stock market crash. Instead, it aligns with the saying, “Buy hedges when you can, not when you have to.” With multiple potential volatility triggers this week—including the FOMC meeting on Wednesday, PCE Inflation data, and Options Expiration on Friday—our short-term volatility models suggest reducing overall exposures.

Altus Access Policy

ALTUS Private Capital, LLC is an investment management firm. ALTUS Private Capital, LLC advises certain private investment funds and institutional clients, and is not available to provide investment advisory or similar services to most other investors. Under no circumstances should any information presented on this website be construed as an offer to sell, or solicitation of any offer to purchase, any securities or other investments. This website does not contain the information that an investor should consider or evaluate to make a potential investment. Offering materials relating to investments in entities managed by ALTUS Private Capital, LLC are not available to the general public.

Terms & Conditions

I am entering this website only to obtain general information regarding ALTUS Private Capital, LLC and not for any other purpose. I understand that investments managed by ALTUS Private Capital, LLC are not available to the general public. I understand that this website does not contain the information I would need to consider for an investment, and that such information is only available to a limited group of persons and institutions meeting specified criteria. I understand that this website has not been reviewed or approved by, filed with, or otherwise furnished to any governmental or similar authority, and is intended only to provide limited information to members of the public who have a legitimate interest in that information for reasons unrelated to making investments. I understand that when ALTUS Private Capital, LLC makes third party information available, ALTUS generally will not have verified statements made by the third party, and the presentation of information may omit important information. I understand that third party materials such as live interviews made available by ALTUS Private Capital, LLC generally will not have been edited by ALTUS and statements in those materials by individuals associated with ALTUS should be understood in the conversational context in which they were made, which may include providing historical background. The content constitutes the proprietary intellectual property of ALTUS or its licensors and that I will not directly or indirectly copy, modify, recast, create derivative works, post, publish, display, redistribute, disclose, or make available the content, in whole or in part, to any third parties, or assist others to do the same, or otherwise make any commercial use of the content without the prior written consent of ALTUS.

I Do Not Accept

Disclosure Acceptance

By registering my information below and clicking "I Accept," I certify that I have read, understand and agree to the foregoing Disclaimer, Terms of Use and Privacy Policy.