zerohedge.com / by Tyler Durden / Nov 26, 2016 5:50 PM
The market moves since the US elections have been both big and surprising, and as JPMorgan notes, fund managers have been either too slow or too reluctant to jump into the Trump trade. However, algo-based Risk-Parity funds suffered the most with their biggest loss since Dec 2015 as market ‘fear’ tumbles to 9 month lows (and stocks are the most overbought in 13 years).
Risk Parity funds were hurt as their equity gains were not enough to offset the sharp selloff in bonds on which Risk Parity funds are typically exposed by four times as much as equities. Correlation between stocks and bonds has normalized thanks to this huge post-Trump divergence (but we note the last time the regime shifted like this was ahead of August 2015’s equity plunge)…
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