5 Trades Show Flight-To-Safety


  • Jason Goepfert

    Jason Goepfert

    Published: 2019-10-25 at 11:02:30 CDT

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A concerted flight to safety

Looking at a handful of different flight-to-safety trades, it’s evident that there has been a lot of risk-off positioning in recent months.

Ratios of the following four paired trades have had an extremely high positive correlation over the past 3 months:

  1. Defensive / Cyclical
  2. Large Cap / Small Cap
  3. Inv Grade / High Yield
  4. Gold / Copper
  5. Low Volatility / High Beta

The correlations among the various is to a point that has typically coincided with extreme risk-off behavior among investors.

Over the past 30 years, when the correlations became this high, it typically led to good longer-term returns, though there were two large outliers.


S&P 500 Value Index

As Bloomberg noted, the S&P 500 Value Index has broken out to a new all-time high. It's the first one in well over a year.

When the Value Index rallied to a new all-time high for the first time in 200+ days, it typically faced weakness over the next 1-2 months, even if it rallied further over the next 6 months.

Keep in mind that the sample size is small.

The post titled 5 Trades Show Flight-To-Safety was originally published as on SentimenTrader.com on 2019-10-25.

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