Risk-On or Risk-Off: Preparing For the Next Market Crash

Published on
August 13th, 2020
33 minutes

How “Economic Scarring” and Low Rates Have Ravaged Quant Investors

Risk-On or Risk-Off: Preparing For the Next Market Crash

The Expert View ·
Featuring Michael Gayed

Published on: August 13th, 2020 • Duration: 33 minutes

The terms risk-on and risk-off are tossed around liberally by market participants -- but what do they actually mean, and how can you determine truly whether the market is in one camp or the other? In this interview, Michael Gayed, author of the Lead-Lag Report and portfolio manager of the ATAC Rotation Fund, answers those questions and explains why risk-off does not guarantee a market downturn. He also describes the backtested indicators of treasury and utility outperformance that he uses to determine the current state of risk-on or risk-off, and how he manages his portfolio accordingly. Additionally, Gayed gives his outlook on the question of continued outperformance of large-cap US equities vs small-caps and emerging markets and discusses the damage zero commission trading is doing to investors in the form of overtrading. Filmed on August 11, 2020.



  • EL
    Eric L.
    27 August 2020 @ 22:29
    Well presented analysis
  • ar
    andrew r.
    21 August 2020 @ 17:08
    Great analysis AND a Bible reference?! A+
  • TD
    T D.
    19 August 2020 @ 21:24
    One of the best videos in a while!
  • JL
    Julien L.
    17 August 2020 @ 12:28
    I hope this knowledgeable man will make a comeback to RV in the future ! Very good video
  • GK
    Gautam K.
    17 August 2020 @ 04:57
    Just watched it again, this guy is amazing
  • WM
    William M.
    16 August 2020 @ 08:07
    Something is seriously wrong, yes you are Michael.
  • JD
    Jonathan D.
    15 August 2020 @ 21:26
    Inject this interview into my veins. I was buying everything, but especially the commentary on the Fed feeding inequality.
  • KR
    Kevin R.
    15 August 2020 @ 18:52
    As a long term investor I agree that buy and hold should be the preferred method of investment. The reality is however, is that it does not work that way. We trust an advisor who has all the credentials to prove he/she knows what they are doing. But then they are forced to sell crap, they are told to push onto their clients by their employers. I waisted 30 years with a professional investment company, who made me less than 3% after promising 10% over the 30 years. The problem is there is no integrity in the industry, and no clear set of rules for people to follow, to invest for the long term. And so we look for investments that will go up over the short term ( I made $15,000 on Tesla with a small investment) So now we have Gold and silver to invest in for the long term and I very happy to finally see a light at the end of the tunnel - that's why it is so disappointing that some so called professionals are now saying it is not going to happen? Is it any wonder that investors are disillusioned and wandering blind in the forest!
  • DT
    Daniel T.
    15 August 2020 @ 12:32
    Am I the only one who doesn’t get the treasury selloff narrative? Michael, can you please elaborate? The implied expected inflation in tips and nominal treasuries is c.1.5% which is not unprecedented, although it is higher since March and there are reasons for the reflation narrative to continue so I get this part. The dollar is c.10% off its recent peak the same DXY or EURUSD levels were not inflationary two years ago? I get it that the rate of change matters, but still, the current dollar levels are nowhere near to levels where importing inflation would be a reality. Also, the current dynamics of lower treasury yields / flattening curve and increasingly negative tips make perfect sense in the era of unprecedented debt monetization by the fed and artificially suppressed yields and potential YC control. It would be interesting to see the data showing higher treasury yields during periods of QE. I think the higher inflation expectations can also be priced in via stagnating / lower nominal yields and increasingly negative tips when you consider unprecedented fed support, potential YC control, unlimited QE programs, direct monetization, etc. Also, the second part of the narrative being the sudden realization of deflationary pressures and yield drop would imply that the entire reflationary narrative is BS, probably a dollar reversal as well. Is this part entirely coming the ‘87 playbook? Nice ideas though and interesting thought process!
  • CX
    Cindy X.
    15 August 2020 @ 03:38
    Just watched it again.
  • CX
    Cindy X.
    15 August 2020 @ 03:37
    This is a rare great show.
  • FH
    Francis H.
    14 August 2020 @ 01:30
    I know you both attempt to keep politics out of the discussion. Yet, Sometimes it's obvious that you view Trump as the issue and the one who is playing politics with Econ. I and many think its the opposite and the dems holding up Econ stimulus in attempt to keep Econ down for election. Politics actually does matter and the economic vision from R and D this year couldn't be further apart. Perhaps and interview that discusses economic policies and consequences of Dem or Republicans victory in 2020. Aloha
    • TM
      The-First-James M.
      14 August 2020 @ 22:17
      Both the Dems and the Republicans are playing Politics with the US Economy. It's sickening to watch - particularly as many of these people are Baby Boomers who may not be around to be held accountable for the utter mess they've created.
  • AM
    Alvaro M.
    14 August 2020 @ 20:37
    His twitter feed is killer, worth a follow. He also engages which is a nice perk
  • DR
    David R.
    14 August 2020 @ 19:00
    Yes I liked it a lot!
  • lf
    liam f.
    14 August 2020 @ 18:48
    21 min in - super informative so far!
  • TR
    Thomas R.
    14 August 2020 @ 13:03
    Brillant. And very well articulated .
  • FS
    Filo S.
    14 August 2020 @ 08:54
    This was one of the best market specific videos to date. It's very rare to listen to an asset manager who can clearly articulate the importance of a repeatable math based systematic process. Especially one based on forward indicators of monetary policy (i.e. Growth and Inflation). This is one of the first money managers I have listened to that I feel like I could trust with my money. A manager focussed on the big picture as well as the math to caculate the rate of change of the rate of change in rates and policy. To generate alpha the best managers have figured out how to front run the fed and position accordingly. Whoever found Gayad, nice work! The best managers are usually not the ones highlighted on CNBC. They are the quiet achievers and out of the box solutionists. I also like that Gayad was comfortable enough citing biblical reference. These are the Universal laws that reign supreme over city, state or federal laws. Mean Reversion is riddled throughout the Bible. Thank you RV.
  • AB
    Alastair B.
    14 August 2020 @ 06:30
    It’s been a good week for RV content this week.
  • FL
    Francis L.
    14 August 2020 @ 03:24
    Interesting points about small cap outperformance. I do think we'll continue to see large companies get larger but I wonder if investors are pricing in higher taxes and antitrust sentiment that could be down the road
  • DP
    Divyesh P.
    14 August 2020 @ 01:07
    Very good
  • HR
    Humberto R.
    13 August 2020 @ 22:50
    Well done RV!
  • NH
    Naser H.
    13 August 2020 @ 21:56
    About what's next - Michael Gayed said sounds like as the yield curve goes up, which is starting now. It is Bullish for stocks, then when there is an over-reaction look out below for stocks.
  • NH
    Naser H.
    13 August 2020 @ 20:40
    This guy is off the hook. Definition of Real Vision!
  • CD
    Carl D.
    13 August 2020 @ 19:09
    unless his fund's strategy has changed over the years, I'm a bit skeptical of his indicators given his fund's under performance from inception to January 2020. At least give an explanation as to why you think it under performed for so long, it was completely ignored, otherwise I don't buy the strategy and recent performance is an anomaly.
    • MG
      Michael G. | Contributor
      13 August 2020 @ 19:33
      Underperformance or outperformance is a function of identifying a correct benchmark. The papers which are evidence of the anomaly can be viewed at https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2224980. Best wishes.
  • JM
    John M.
    13 August 2020 @ 17:54
    Great interview. Why increase taxes though if government can keep printing?
  • SW
    Stephen W.
    13 August 2020 @ 09:11
    One of the best videos I've seen on RV, just kept saying to myself 'correct, correct, correct' I'm on-board with this strategy + BTC!
    • PD
      Pieter D.
      13 August 2020 @ 16:41
      Look out for that confirmation bias ;).
  • GK
    Gautam K.
    13 August 2020 @ 15:37
    Pure brilliance, this is guy is amazingly insightful. One of the best RV interviews.
  • MK
    Marko K.
    13 August 2020 @ 15:33
    interesting interview. great job.
  • sp
    spencer p.
    13 August 2020 @ 07:25
    the most annoying narrator ever.
    • EF
      Eric F.
      13 August 2020 @ 15:32
      The most annoying comment ever.
  • PQ
    Peter Q.
    13 August 2020 @ 15:31
    Congrats on the great track record Michael - PQ
  • jH
    jonathan H.
    13 August 2020 @ 15:26
    Excellent thoughtful on how to trade.
  • MG
    Michael G. | Contributor
    13 August 2020 @ 11:25
    This is Michael Gayed - around the 19 minute mark I mispoke (meant to say save capitalism with socialism). Thank you all for watching.
  • SB
    Stewart B.
    13 August 2020 @ 10:58
    I thought the idea of relative strength in utes and treasuries preceding risk off was interesting. Great interview. The only thing that was a little annoying was the background skyline was faked in, and often cut out, giving the impression that Gayed only had one ear, and distracting me to wonder what his real background scene was! I'd like to see Gayed again in a future interview.
  • NR
    Nathan R.
    13 August 2020 @ 10:56
    Trend versus Path. Tres important...
  • SK
    Stephen K.
    13 August 2020 @ 10:46
    Outstanding Michael, very insightful...thank you.
  • AB
    Ameet B.
    13 August 2020 @ 10:17
    Excellent. Please bring him back on again.
  • JF
    Josh F.
    13 August 2020 @ 10:08
    I was originally skeptical, but if you overly his fund on the performance of Brevan's Macro fund it looks at least in-line.
  • NF
    N. F.
    13 August 2020 @ 09:16
    The comments on the Fed were pure gold.