Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Thematic (Sector/Industry)

United states / Thematic (Sector/Industry)

Notwithstanding the USMCA driven reflex rally, one puzzle to this market is the remarkable level of complacency in the face of potential market moving events, such as the trade war (see yesterday’s publication <a href="https://www.smartkarma.com/insights/quantifying-the-fallout-from-a-full-blown-trade-war" target="_blank">Quantifying the Fallout from a Full-Scale Trade War</a>).From a technical perspective, complacency can be observed through the historically low level of weekly Bollinger Band on the VIX Index, which has foreshadowed volatility spikes. The chart below depicts the 10-year history of this indicator. When combined with episodes of low levels of NYSE and NASDAQ new highs, which is the case today, the outlook is particularly worrisome.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/065/606/original/VIX%20BB.png?1538400547" class="editor-image img-responsive" data-smartkarma-image-id="65606"></figure>We have identified three possible near-term bearish triggers that could shake this market:<ul>
<li>China: Either in the form of trade tariff retaliation, or possible unexpected economic weakness;</li>
<li>Negative earnings surprise during Q3 earnings season; and</li>
<li>Tighter fiscal policy from mid-term election political re-alignment.</li>
</ul>

Notwithstanding the USMCA driven reflex rally, one puzzle to this market is the remarkable level of complacency in the face of potential market moving events, such as the trade war (see yesterday’s publication Quantifying the Fallout from a Full-Scale Trade War).From a technical perspective, complacency can be observed through the historically low level of weekly Bollinger Band on the VIX Index, which has foreshadowed volatility spikes. The chart below depicts the 10-year history of this indicator. When combined with episodes of low levels of NYSE and NASDAQ new highs, which is the case today, the outlook is particularly worrisome.We have identified three possible near-term bearish triggers that could shake this market:
China: Either in the form of trade tariff retaliation, or possible unexpected economic weakness;
Negative earnings surprise during Q3 earnings season; and
Tighter fiscal policy from mid-term election political re-alignment.


Three Possible Bearish Triggers for a Complacent Market