JPM Head Quant: Expect Up To $300 Billion In Program Selling, “5-10% Near-Term Downside To The S&P500”

Sunday, June 26, 2016
By Paul Martin

by Tyler Durden
Jun 26, 2016

On Friday, when we described the assessment of UBS derivative strategist Rebecca Cheong, who anticipates as much as $150 billion in program and systematic strategy selling in the next 2-3 days, we wondered if the Friday silence from JPM’s quant guru meant he was willing to hand over the baton of the market’s most prominent prognosticator of quant moves to others. The answer was no, because shortly thereafter Kolanovic chimed in with a note just after the US close, in which he agreed with Cheong and said that the program selling was about to begin, to wit:

As we noted earlier this week, we expected a Brexit outcome to have an asymmetric impact for equities, with downside exacerbated by unwind of long equity investor positioning. In particular, increasing equity volatility would induce systematic strategies (Volatility Targeting, Risk Parity, CTAs) to start deleveraging their high equity exposure, resulting in $100-300 billion of selling.

The reason is simple: few were prepared for a Brexit outcome and “going into this event, long/short equity and macro hedge funds had higher equity exposure than average, while mutual fund cash balances have remained low and retail investor equity exposure were close to 2007 highs.”

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter