But while retail investors are posting losses in both their stocks and bonds, the explosion of volatility in the markets is creating plenty of opportunities for macro traders like Jones, who tend to outperform when markets are choppy.
“These are great times for macro, and great times for macro are generally not great times for general investing,” Jones said.
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“the macro works when everything is a bit broken. That’s when you have the volatility which is really better for the type of trading I do.”
Volatility has spiked across asset classes and markets as the Federal Reserve has begun the process of downsizing its nearly $9 trillion balance sheet while raising interest rates at the most aggressive pace since the 1980s. The Federal Reserve is not alone, of course: Dozens of central banks around the world are also raising interest rates.
The ice bofa move index, which tracks volatility in fixed income, hit its highest level since 2007 late last month when it hit 158.99 before giving up a bit.
the cboe vix volatility index, +0.25%, also known as the vix, or wall street’s “fear gauge,” rose to 33.07 on monday as the s&p 500 fell. the vix level is based on short term options trading in the s&p 500.
forex market volatility has also increased as the us. The dollar, the world’s most popular reserve currency, has strengthened at the fastest rate in years thanks in part to the Federal Reserve.
ice usa uu. the dxy dollar index, +0.83%, a measure of the dollar’s strength against a basket of rivals, is up nearly 18% since January. 1. The index rose 0.3% on Monday to 113.15.
When asked how investors should navigate the markets during a downturn, Jones said he has a “playbook” that has worked in the past.
according to this playbook, jones expects “short-term rates to stop rising and start falling” before the us. uu. stocks finally bottomed out.
Based on this theory, jones said 2-year treasuries tmubmusd02y, 4.510% are starting to look attractive as yields have risen more than 3.5 percentage points since the beginning of the year. bond prices fall as yields rise.
Market strategists have been saying for weeks that moves in short-term yields have been causing stocks and the dollar to swing.
see: the stock market is rising as the us. uu. dollar declines. it’s about bonuses.
Ultimately, Jones hopes the turning point in Treasury yields will help usher in a massive rally in assets that have tumbled as inflation rose. even cryptocurrencies like bitcoin btcusd, -0.10% will likely benefit, he said.
“when we get into that recession, there will be a point where the federal reserve will stop raising and start slowing down, or even at some point reverse those cuts, and you will have a massive rally in a variety of inflation trades defeated, including cryptocurrencies,” said jones.
see: why stock investors keep falling for the fed’s “pivot” speech, and what it takes to bottom out
Jones also said that he maintains a small allocation to cryptocurrencies.
“We are going to have to make tax cuts. At a time when there is too much money, something like cryptocurrencies, specifically bitcoin and ethereum, will have value at some point,” he said.
Stocks fell for the fourth straight session on Monday as the S&P 500 fell 0.8% to 3,612.39. the dow jones djia industrial average, -1.34% lost 0.3% to 29,202.88 and the nasdaq composite comp, -3.08% led the market lower with a 1% drop in early trading. the afternoon.