Business & Investment

Being agile in crisis and confident in your knowledge will pay off –

As a self-proclaimed central bank Kremlin scholar, I pay close attention to what policymakers say, when, and how they say it. However, two more steps are needed to turn a central bank statement into a viable trade idea.

The first is that you have to be agile during a crisis, a very volatile market. The tide can change quickly and you need to discard previously held ideas and accept new ones. This means that if the market is scarce, you should be willing to turn on the dime and get longer. You cannot marry a position. Second, you need to be confident in the knowledge you have gained from your previous market experience. If history is not repeated, it certainly lingers. You need to build a library of past market episodes and past events – empirically (by trading) or episodicly (by reviewing data to read, model and backtest market history). ..

These insights are drawn from what happened in March 2020, when financial markets were in a dizzying tailwind. But on March 26, 2020, Federal Reserve Board Chairman Jerome Powell said in an interview with NBC’s Savannah Guthrie something that creates déjà vu. “There will be no shortage of ammunition.” I was active in the market during the eurozone debt crisis, when ECB President Mario Draghi said in July 2012. Euro.. It marks the bottom of European bonds around, and the beginning of the end of the financial markets-the aspect of the debt crisis. In retrospect, Draghi’s comments proved to be a clear signal of risk-taking in eurozone financial markets.

It was immediately noticed that Fed Chair Powell’s March 2020 comment was cut from the same cloth as ECB President Draghi’s July 2012 comment. I couldn’t take full advantage of the July 2012 market transformation, but I was young, stubborn, and didn’t have the broad knowledge I have today. This time (empirically and accidentally) we were able to take advantage of the transformation of financial markets.

In addition, “Don’t waste the crisis.”

— By Christopher Vecchio, CFA, Senior Currency Strategist

Being agile in crisis and confident in your knowledge will pay off – Being agile in crisis and confident in your knowledge will pay off –

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