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Alternative Market Briefing

The Big Picture: Volatility is here to stay

Tuesday, February 27, 2018

Bill Michaelcheck
Benedicte Gravrand, Opalesque Geneva:

Bill Michaelcheck, founder and CIO of Mariner Investment Group, an alternative asset manager headquartered in New York, believes the market has turned a corner and that volatility is here to stay. Now is a good time for fixed income investors to do arbitrage bets, he says. He explains why here.

Opalesque: Why do you think volatility is here to stay? 

Bill Michaelcheck: First of all, the Central Banks are starting to remove the monetary stimulus of the last several years in two ways; the Fed is gradually raising interest rates and reducing their portfolio of government bonds. This is putting pressure on the private market.

In the coming year, the Fed will reduce its balance sheet by approximately $200 billion, which is additional debt to be bought by the market from the roughly $1 trillion deficit the U.S. is forecasting.

This means we are more than doubling the U.S. securities that will be put into the market place in the coming year.

Of course, this fiscal stimulus when the economy is strong and unemployment is at a multi-year low, would be considered to be putting fuel on a roaring fire in terms of Keynesian economics.

So we're seeing this pro-cyclical fiscal stimulus right on top of monetary tightening. To me, this is like having one foot on the gas and one foot on the break.  

The bigger issue is that the investors are starting to feel that the political leaders in Washingto......................

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