Sentiment Could Further Improve

| Multi Asset

Our Market Stress Nowcaster, which indicates the current level of market tension by looking at liquidity, volatility and credit spreads across geographies and asset classes, shows clear improvement since the height of the crisis. Yet, it still has some way to fall to reflect fully the improving macro context.

The VIX Index in 2020 saw dramatic swings, from 82 in March to 21 at the end of the year. This strong improvement was also reflected in credit spreads. High Yield spreads reached 1084 bps in the US in March and 870 bps in Europe, falling back to 400 and 350 bps respectively at the end of 2020.

However, two factors lead us to believe that market conditions – and therefore investor sentiment – could improve further. First, in spite of the lower VIX now, the term structure of its futures remains upward sloping and the far end of the curve remains quite high by historical standards ( August 2021 futures were still about 26% at the end of December 2020). Second, the skew of the VIX curve, which indicates whether investors are insuring themselves against a drop or a rise in equity markets, remains strongly tilted towards downside protection.


Sentiment Could Further Improve
Source: Bloomberg, Unigestion. Data as at 31 December 2020.

Important Information

The information and data presented in this page may discuss general market activity or industry trends but is not intended to be relied upon as a forecast, research or investment advice. It is not a financial promotion and represents no offer, solicitation or recommendation of any kind, to invest in the strategies or in the investment vehicles it refers to. Some of the investment strategies described or alluded to herein may be construed as high risk and not readily realisable investments, which may experience substantial and sudden losses including total loss of investment.

The investment views, economic and market opinions or analysis expressed in this page present Unigestion’s judgement as at the date of publication without regard to the date on which you may access the information. There is no guarantee that these views and opinions expressed will be correct nor do they purport to be a complete description of the securities, markets and developments referred to in it. All information provided here is subject to change without notice. To the extent that this page contains statements about the future, such statements are forward-looking and subject to a number of risks and uncertainties, including, but not limited to, the impact of competitive products, market acceptance risks and other risks.

Data and graphical information herein are for information only and may have been derived from third party sources. Although we believe that the information obtained from public and third party sources to be reliable, we have not independently verified it and we therefore cannot guarantee its accuracy or completeness. As a result, no representation or warranty, expressed or implied, is or will be made by Unigestion in this respect and no responsibility or liability is or will be accepted. Unless otherwise stated, source is Unigestion.

Past performance is not a guide to future performance. All investments contain risks, including total loss for the investor.