Passaic Partners is a majority employee-owned investment firm dedicated to providing liquid alternative investment solutions to long-only and hedge fund investors.

Our derivative based strategies provide tools for investors to efficiently gain exposure, improve returns, reduce volatility, and provide liquidity when needed most.


Where have all the sellers gone?

October 2023

  • The MOVE informs us the bond market is actively undergoing repricing.
  • Equities will remain unguided until bonds return to harmony.
  • It is a trader’s market.
  • When was the last time we saw an equity market without clear and defined sellers?

One big influence on the markets this year has been elevated fixed income volatility (as measured by the “MOVE” index). The MOVE has been much higher than normal. The interesting part is that last year, the MOVE was driven by the front end of the fixed income curve, driven by Fed rate hikes. This year, the MOVE is driven by the back end of the curve, a supply and demand dynamic, not the Fed. It’s safe to say that supply has had a role in pushing interest rates higher. In effect, investors demand higher returns to absorb the new issuance...

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October 2023

  • VIX was unusually low and in a tight range as the market corrected.
  • Volatility bottomed out on September 15.
  • Relationship between interest rate volatility and equity volatility should normalize.

SPX pierced 4,600 in late July, the top of an aggressive rally which subsequently set up a roughly 10% correction through the end of October. August 2023 through October 2023 was the first three-consecutive-negative- months since Q1 2020. Despite the bearish price action in equities, the VIX averaged 15.4, and within a tight range of 13 to 17.

Equity volatility has been subdued because correlations across stocks have been low. This is a function of widespread dispersion in returns and valuation expansion within the index, the ‘Magnificent Seven’ vs. everything else...

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© 2023 Passaic Partners LLC is a Registered Investment Adviser based in Newark, New Jersey.