Tail Risk Report: January 2019 - who will blink first - the Fed or the market?



​Janus Henderson’s US-based Multi-Asset Solutions Team present their latest tail risk report, using options market prices to infer expected tail gains and losses for each asset class. The options-implied signals are indicating a potential shift to a higher-risk, higher-volatility environment across bonds and equities. Both the expected tail loss and the expected tail gain implied by options prices have risen sharply.

Key takeaways:

  • Equities appear most attractive, followed by commodities (inflation-sensitive assets) when assessing relative attractiveness across assets.
  • Growth: US and emerging market equities are showing the highest tail-based, risk-adjusted attractiveness globally. US small caps are now nearly as attractive as large caps.
  • Capital preservation: our signals indicate the US is the most attractive region to source duration.
  • Inflation assets: the options market is indicating a slightly weaker dollar going forward. Within the commodity space, energy and precious metals are leading the pack. A weaker dollar should bolster commodity prices in general.

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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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