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Even Conservative Investors Hurt By Recent Stock Market Whipsaw

By Michael HarrisMarket OverviewApr 05, 2018 03:29AM ET
www.investing.com/analysis/even-conservative-investors-hurt-by-recent-stock-market-whipsaw-200303265
Even Conservative Investors Hurt By Recent Stock Market Whipsaw
By Michael Harris   |  Apr 05, 2018 03:29AM ET
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Some traders are now complaining that markets went from extreme low to very high volatility and the higher risk has had a negative impact on profitability due to it impact on position size. Specifically, most traders size position based on realized volatility. The Average True Range (ATR) indicator is a popular trader metric for measuring volatility. Year-to-date, the SPY ETF 14-day ATR has increased from 0.53% to 1.92%, based on closing prices, as shown in the chart below:

SPY Daily Chart with ATR(14)
SPY Daily Chart with ATR(14)

But even conservative investors are in the red year-to-date. For example, the 60/40 portfolio in SPY/TLT ETFs is down 2.3% year-to-date, as shown in the chart below, since both SPY and TLT are in the red by -0.84% and -4.47%, respectively.
60/40 SPY/TLT Portfolio  YTD Performance Chart
60/40 SPY/TLT Portfolio YTD Performance Chart

After a prolonged period of irrational exuberance, trading but also investing gains have evaporated. This is normal and anticipated. The whipsaw will continue until excesses are removed and the market returns back to normal operating mode, but the duration of the painful period is unknown at this time.

Even Conservative Investors Hurt By Recent Stock Market Whipsaw
 

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Even Conservative Investors Hurt By Recent Stock Market Whipsaw

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Disclaimer: This blog (the Blog) is created and authored by Michael Harris (the Author) and is published and provided for informational purposes only. The information posted in the Blog constitutes the Author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You understand that the Author is not a financial adviser, that the Author is not advising, and will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained in the Blog may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. From time to time, the Author may hold positions or other interests in securities mentioned in the Blog and may trade for his own account(s) based on the information presented. The Author may also take positions inconsistent with the views expressed in its posts on the Blog.
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