With the initial statements out of the G20 conference in Toronto this weekend failing to ease anyone’s fears of a double dip recession – the specter of more volatility on the road ahead appears very real. But there are also improving corporate earnings, the absence of inflation, and improving consumer balance sheets to consider – making the argument that the worst is behind us.
Which side should you believe? We tend to think there is more trouble on the horizon, thus think having long volatility exposure in your portfolio makes a lot of sense. But we’re also only about 65% convinced of that – meaning it pays to have some long volatility exposure that won’t do terribly if that doesn’t come to pass.