{"id":123320,"date":"2019-06-17T16:10:28","date_gmt":"2019-06-17T16:10:28","guid":{"rendered":"https:\/\/www.bnreport.com\/markets-may-be-underpricing-major-risks-from-fed-g-20-meeting\/"},"modified":"2019-06-17T16:10:28","modified_gmt":"2019-06-17T16:10:28","slug":"markets-may-be-underpricing-major-risks-from-fed-g-20-meeting","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/markets-may-be-underpricing-major-risks-from-fed-g-20-meeting\/","title":{"rendered":"Markets may be underpricing major risks from Fed, G-20 meeting"},"content":{"rendered":"

By Joanna Ossinger<\/strong><\/p>\n

Financial markets are signaling investors see little risk of disruption from upcoming events, despite the potential for major shifts in the course of Federal Reserve policy and US-China trade negotiations.<\/p>\n

The range of options for this weeks Fed meeting spans a surprise interest-rate cut, a set-up of one down the road or a continued stance of patience, given still-solid economic growth. Late next week, the outcomes of the Group-of-20 summit look binary: either US-China trade talks get back on track, or investors must anticipate further tariff hikes. And the usual run of data must be added to the mix, such as the July 5 payroll report.<\/p>\n

Yet despite the potential for major market moves from these events, JPMorgan Chase<\/a> & Co. strategists estimate that the embedded volatility risk premium is \u201csignificantly\u201d below its historical average. The group, including Nikolaos Panigirtzoglou, cited a gauge of implied to realized volatility using 12 measures across five asset classes.<\/p>\n

Other oddities include a large number of short positions on futures tied to the VIX \u2014 the so-called fear gauge tied to US stocks \u2014 and a low amount of hedging as seen in the put-to-call open-interest ratio for S&P 500 Index options, the JPMorgan team wrote in a note Friday.<\/p>\n

\u201cOption markets do not embed enough cushion against the significant event risk markets are facing over the coming weeks,\u201d the strategists concluded.<\/p>\n

Equity positioning is still on the high side and vulnerable to a spike in volatility. <\/figcaption><\/figure>\n

And then theres equity positioning, which is still on the high side and vulnerable to a spike in volatility, according to Deutsche Bank<\/a> AG. Positioning from hedge funds is light on US equities though concentrated in the same stocks as the S&P 500, while in equity futures its near the top its historical range, strategists including Hallie Martin and Binky Chadha wrote in a separate report.<\/p>\n

Systematic strategies \u201care heavily allocated to US equities and would be sellers on a significant vol spike into a record low liquidity environment,\u201d the Deutsche strategists wrote. Buybacks, which have been supportive of US stocks, will start to run into quarterly blackout periods later this month coinciding with the G-20 meeting, they highlighted.<\/p>\n

There are some markets appearing to gird for stormy weather ahead. Treasuries have been climbing since early May, when President Donald Trump announced hed expand tariffs on Chinese imports. Five-year notes are effectively pricing in a recession, the JPMorgan analysRead More \u2013 Source<\/strong><\/a>
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ET Markets<\/a><\/h5>\n

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By Joanna Ossinger<\/p>\n

Financial markets are signaling investor..<\/p>\n","protected":false},"author":1,"featured_media":123321,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-123320","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nMarkets may be underpricing major risks from Fed, G-20 meeting - Business News Report<\/title>\n<meta name=\"description\" content=\"By Joanna Ossinger Financial markets are signaling investor..\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/markets-may-be-underpricing-major-risks-from-fed-g-20-meeting\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Markets may be underpricing major risks from Fed, G-20 meeting - 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