EPS and core thesis suggest adding exposure on volatility.
Earlier in the year, we were much more nervous about a meaningful correction because sentiment was at an optimistic extreme, the CBOE Volatility Index (VIX) was historically low for an extended period without any meaningful drawdowns, and the S&P 500 (SPX) was up 7.5% in the first three weeks of the year. As we enter the 2nd half, the extreme economic and market optimism has been relieved, and we are about to enter what should prove to be a very solid Q2/18 EPS reporting season. We are not suggesting there won’t be corrections and volatility, but ultimately the SPX correlates o the direction of EPS, which should stay positive through 2019.
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