The Dance of the MOVE/VIX Ratio: An Untold Tale of Stocks, Bonds, and Diversification

Today, let's navigate through the exciting maze of market indices and ratios.

I know, I know, you might be thinking, "Kieran, isn't that a little dry?"

But trust me, by the end of this journey, you will find the tales of stocks, bonds, and a particular ratio that I will be talking about.

This particular ratio is a barometer of market sentiment, capturing the comparative volatility in the bond and equity markets.

But have you ever stopped to wonder how this could directly affect your investment decisions, especially as a small business owner or professional in Singapore?

This ratio is known as the MOVE/VIX ratio.

In simple term, MOVE index measures uncertainty or volatility in the bond market, while the VIX gauges the same for the equity market.

When the MOVE/VIX ratio falls, it suggests that the bond market is settling down, while the stock market gets a bit rowdier.

But what does this mean for your portfolio?

Here's a thought to chew on: when the MOVE/VIX ratio falls, historical data suggests that bonds tend to outperform stocks.

Yes, you heard me right.

With the MOVE/VIX ratio so elevated now and equities in the overbought regions, this seems to be an interesting opportunity to allocate into your portfolio.

When the ratio fell, bonds tended to outperform stocks.?Falling uncertainty in interest rates points to them moving lower, boosting bond prices as they move opposite to yields.

Rising uncertainty in stocks, though, require higher rates of returns for investors, pointing to an initial fall in price (i.e., discount) to incentivize investors to own them (i.e., risk premium).

That brings me to another point - are equities the only option?

Definitely not. There are other asset classes out there, waiting to be explored, and potentially offering more promising opportunities.

So why not take some time to explore and diversify?

Drop me a DM to know more on how you can do that.

Always stay safe and invest safe...