HUGH HENDRY: The 'Invisible Regime' Keeping Volatility In Check Has Become 'Unhinged'

From Hugh Hendry, CIO of The Eclectica Fund. This year we have pursued five macro themes: long the US dollar, short China, long Japanese equities, long low variance equities and long interest rate contracts at the short end of G10 fixed income markets. Towards the end of May, however, the Fund experienced a sharp rise in its volatility from an annualised rate of 4% to 7%. The invisible regime of low volatility and low correlations that had been so supportive of risk markets for at least the last...