ES,bond,$,gold - reaction to shock event

Discussion in 'Metal Futures' started by TraderD, Feb 5, 2004.

  1. TraderD

    TraderD

    Trying to model behavior of portfolio in response to shock event(s) during regular trading hours (not overnight). Why shock event? Because in case of shock stops may not be much of a help. Thus effect on multiple positions will be more significant, so it is important to know possible scenarios/correlations


    So, it is 11:00 AM Eastern time and ...


    Case1: Significant terrorist act

    ES-down
    bond-down
    $-down
    gold-flat/or up


    Case2: Sudden selloff in equities ("bad news from Asia" or "1987")

    ES-down
    bond-down
    $-down
    gold-flat/or up


    This might be an oversimplification. Still, some scenarios are more likely than others, brainstorming this topic appears to be a valuable exercise.
     
  2. saxon

    saxon

    Case1: Significant terrorist act

    ES-down
    bond-UP
    $-down (if event in the US)
    gold-UP


    Case2: Sudden selloff in equities ("bad news from Asia" or "1987")

    ES-down
    bond-UP
    $-UP
    gold-DOWN
     
  3. TraderD

    TraderD

    Could you explain the logic behind your choices?
     
  4. saxon

    saxon

    Case1: Significant terrorist act

    ES-down
    bond-UP
    (Negative impact on the economy. Bad for equities, good for bonds.)

    $-down (if event in the US)
    (Obvious concern about the stability of US economy.)

    gold-UP
    (Tangible asset in times of socio-economic turmoil.)

    -------------------------------------------------------------------

    Case2: Sudden selloff in equities ("bad news from Asia" or "1987")

    ES-down
    bond-UP
    (Selloff in equities implies the expectation of a slower economy ahead...which usually, but not always, means lower interest rates, which would move bond prices higher).

    $-UP
    (Slower economy usually, but not always, means lower inflation. Lower inflation usually, but not always, means a higher dollar).

    gold-DOWN
    (As a hedge against inflation, gold would become less attractive).


    Admittedly, a very simplistic analysis. For sure, I'm no economist. Just for kicks.
    saxon