Navigating Late-Cycle Cross Asset Volatility


Concerns surrounding the robustness of global growth have led to a pick-up in volatility across various asset classes. However, not every asset class has suffered uniformly - while equities, credit and commodities experienced extreme market moves in 2018, rates and forex volatility has been extremely subdued. In other words, dispersion across asset volatility has risen.

In this third edition of our flagship Vol Themes publication, Navigating Late-Cycle Cross Asset Volatility, Societe Generale Cross Asset Research’s cross asset derivatives strategy analysts aim to unlock the mystery of diverging volatilities by studying the trends across the business and monetary policy cycles. We deliver an in-depth analysis of various drivers of volatility across equities, commodities, forex and rates and examine how volatility moves across the economic cycle. We also touch upon how credit spreads react during the various phases of the cycle and present a summary of the most profitable risk premia strategies for different volatility regimes. 

Most importantly, we use our insights into individual assets to obtain a broad overview of cross asset volatility across the economic cycle. Not only do we find that there is a tangible relationship between the volatility of an asset and the stage of the business cycle, but we also determine that there is an often-observed sequencing in the transition to a higher volatility regime. We find that certain assets lead others to switch to a higher volatility regime, while some are consistent laggards. We discuss the reasons for these divergences, highlight the commonalities and differences in driving factors and suggest the best ways to prepare for volatility going forward.”



Societe Generale Cross-Asset Research is composed of more than 200 Analysts, Strategists, Economists and Quant, combining their expertise into ‘Research-based’ and innovative solutions suited to client’ needs: fundamental studies and expert views, investment ideas and long-term strategies, trade ideas and tactical baskets, thematic and systematic indices, quant solutions. On top of its established UK and Western European base, Societe Generale Cross-Asset Research benefits from a global coverage thanks to its presence in the US and in Asia (Hong Kong, Singapore, Tokyo and Bangalore) and Societe Generale local networks in Eastern Europe.


This editorial contains financial analysis which reflects the opinion of the Cross-Asset Research department of Societe Generale at the date of its publication. It does not necessarily reflect the views of the other departments of Societe Generale nor the official opinion of Societe Generale. This interview is dedicated to institutional and professional investors and is not deemed to be seen and used by retail investors for investment purpose. The viewers shall consult their own financial advisers to make their own appraisal.