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Is The $500 Billion Risk Parity Fund Industry Going To Trigger A Crash?

Published 08/13/2017, 01:23 AM
Updated 07/09/2023, 06:31 AM
US500
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VIX
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The market riggers are now pulling the pin.

All market rigs end badly. And given the fact that this one has been particularly egregious, the results will be quite ugly.

You cannot pin the S&P 500, perhaps the single most important stock index in the world, for weeks and expect it to end well. This is particularly true when you’re pinning it using Risk Parity Funds and their “buy/sell” algorithms.

Those same algorithms that have mindlessly bought stocks every time the VIX gets smashed, will mindlessly SELL stocks when the VIX explodes higher.

And the VIX will be exploding higher. Historically, the average level for the VIX since 1993 has been around 18-20. We’ve been stock at 9-10 for weeks now.

Not anymore. Today’s move could very well be the start of something big. The below chart predicts a move to 30 if not 40 in the coming weeks. If this was a chart for an individual stock, you’d say it was a screaming buy.

VIX Monthly Chart

So what happens when the VIX spikes to 30-40 and the $500 billion worth of capital managed by Risk Parity Funds starts dumping stocks?

Buckle up, we’re about to fund out.

SPX Daily Chart

You’ve been warned.

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