Stocks Rally Again: Investing in Volatility

MThe markets remain shaky, driven constantly this year by each new economic report. The latest is the release of June retail sales, up 1% as consumers continued to spend during a period of historic inflation.

Markets had previously fallen on the CPI reading of 9.1% for June, released on Wednesday, but have now rallied to end the week on a positive note for the first time in five sessions, the WSJ reported. . Investor uncertainty continues to rock markets, a trend that is likely to continue as economists and analysts increasingly assess the likelihood of a recession in the face of an aggressive Fed and runaway inflation.

“Recession risks have increased since the start of the year,” Mike Bell, global market strategist at JP Morgan Asset Management, told the WSJ. “If we don’t get any pullback signals from consumers, it may not be as bad as people fear, but if we do get this, it’s a signal that recession risk is materializing.”

In June, retail sales also increased by 1% in the United States, and although part of this increase is attributed to the increase in the prices of goods and services, some indicate that the American consumer is still able to manage price increases, for now, Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute, told the WSJ.

“Consumers are still spending a lot of money,” General Mills CEO Jeff Harmening said on an earnings call in June. “Now as they look to the future they get nervous because they see inflation and so on. But right now the consumer is in a decent situation.

Earnings season has kicked off with many financial institutions reporting better-than-expected profits but also seeing a slowdown in mortgage lending. Housing and energy were major contributors to inflation last month, and since rent prices tend to lag six to nine months, housing should continue to be an inflationary pressure until the end. of the year.

Historic inflation coupled with a labor market still showing tight growth could see the Fed potentially raise interest rates even more aggressively than 0.75% at their meeting next week, which Fed Governor Waller has said. said he was perhaps open to, likely to create more volatility and strong market reaction.

“We have important retail sales and housing data releases ahead of the July meeting,” Waller said Thursday ahead of today’s retail trade report. “If this data is materially stronger than expected, that would make me lean towards a bigger upside at the July meeting as it shows demand is not slowing fast enough to bring inflation down.”

Investing for Volatility and Uncertainty with Managed Futures

As markets continue to be influenced by every new economic data, investors looking for a fund that has performed well during volatility should consider the iMGP DBi Managed Futures Strategy ETF (DBMF).

DBMF is a managed futures fund designed to capture performance no matter how the stock markets move. The fund seeks long-term capital appreciation by investing in some of the most liquid US futures contracts as part of a strategy used by hedge funds.

DBMF enables portfolio diversification across asset classes that are uncorrelated to traditional stocks or bonds. It is an actively managed fund that uses long and short positions in derivatives, primarily forwards and forwards. These contracts cover domestic equities, fixed income, currencies and commodities (through its Cayman Islands subsidiary).

The position the fund takes in futures and domestic managed futures is determined by the Dynamic Beta Engine. This proprietary quantitative model attempts to determine how the largest commodity trading advisory hedge funds have their allocations. It does this by analyzing the 60-day performance of CTA hedge funds and then determining a portfolio of liquid contracts that would mimic hedge fund performance (not positions).

DBMF takes long positions in derivatives with exposures to asset classes, sectors or markets that are expected to rise in value and takes short positions in derivatives with exposures that are expected to fall in value. Under normal market conditions, the fund seeks to maintain volatility between 8% and 10% per year.

DBMF has a management fee of 0.85% and an additional 10 basis points for other expenses listed in the prospectus.

For more news, insights and strategy, visit the Managed Futures channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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