The Cross-Asset Curveball

Published on
September 25th, 2019
57 minutes

The Cross-Asset Curveball

The Interview ·
Featuring Andrew Lapthorne

Published on: September 25th, 2019 • Duration: 57 minutes

Why are bonds and stocks sending conflicting signals at investors? Andrew Lapthorne, global head of quant research at Societe Generale, helps answer this question in his conversation with Roger Hirst. In this conversation, you’ll understand which markets have already priced in recession and why historically defensive assets may not appear as advertised. Lapthorne also dissects the connection between volatility and corporate spreads. Filmed on September 13, 2019 in London.



  • TJ
    Tay J.
    31 December 2019 @ 22:31
    Bring Andrew back soon. These quiet, thoughtful voices are rare — and so unusually valuable in the investment media.
    • DS
      David S.
      15 January 2020 @ 22:24
      Agreed. I watch this video often when I need a reality check. Excellent interview. I would add experienced and sincere to the quiet and thoughtful voice. You can tell how patient he would be with his clients. The RVTV library is a gold mine. DLS
  • PP
    Peter P.
    25 September 2019 @ 12:18
    I love how everyone backtest works until it doesn't. These guys are don't seem to get curve fitting doesn't work.
    • AJ
      Adam J.
      9 October 2019 @ 14:28
      Of course, the Head of Quant strategies at a highly successful (particularly in the derivative & quant space) global investment bank doesn't understand the issues with curve fitting..........*eyeroll* Come on, dude.
  • EK
    Edward K.
    8 October 2019 @ 14:23
    Worthwhile for his views on value alone.
  • Nv
    Nick v.
    25 September 2019 @ 11:36
    Great response to your German guest from last week
    • DS
      David S.
      3 October 2019 @ 13:16
      Both can be correct depending on time frames. I liked both interviews very much DLS
  • MB
    Markus B.
    2 October 2019 @ 07:25
    very smart! worth watching a few times
  • NH
    Neil H.
    30 September 2019 @ 18:08
    One of the best videos yet. Albert Edwards has been right on yields falling and wrong n equities for a long time. Would be great to have him come on and articulate what he got both right and wrong.
  • JT
    Jayne T.
    30 September 2019 @ 17:54
    Those chairs look really uncomfortable. C’mon RV, spring for some comfy ones-lol!
  • GB
    Gregory B.
    30 September 2019 @ 03:29
    Great insights. Would be nice to have a link to the SG slides.
  • TB
    Timothy B.
    26 September 2019 @ 06:36
    Negative rates are so dumb, it makes where the more a company borrows, the greater is their ability to pay dividends, buy back, and increase fictional value.
    • DS
      David S.
      30 September 2019 @ 01:41
      One of the causes is fear of keeping money in European banks after Malta and Cypress. It shows there are consequences for stupid actions. Italy almost did it, but the politicians would have been lynched DLS
  • RM
    Robert M.
    29 September 2019 @ 16:56
    That peak debt chart is scary. How long will these debt balls be juggled before they come crashing down?
    • DS
      David S.
      30 September 2019 @ 01:33
      I agree. DLS
  • GG
    Gary G.
    28 September 2019 @ 22:47
  • SS
    Shanthi S.
    28 September 2019 @ 09:58
    Loved this.
  • NR
    Nelson R.
    27 September 2019 @ 23:33
  • JS
    Jason S.
    27 September 2019 @ 16:54
    Excellent interview
  • SG
    Sven G.
    27 September 2019 @ 16:14
    much more interesting than I was expecting... Thanks! great guest & interviewer!
  • HM
    Hugh M.
    27 September 2019 @ 12:23
    Great interview. Very clear talker.
  • MB
    26 September 2019 @ 16:19
    Thank you! That was very informative.
  • WB
    Wes B.
    25 September 2019 @ 16:42
    I think he really nails how the mkt is positioned with a imminent recession bias. It's interesting that cyclicals are the value stocks this time around. I feel like most aren't prepared for a situation where the mkt comes around to a less bad outlook and cyclicals rip and growth and bond proxies selloff. This outcome would not surprise me at all.
    • BM
      Brenton M.
      25 September 2019 @ 23:31
      True, a possibility, but my take-away was not that the market was incorrectly signalling recession, but that it is incorrectly POSITIONED for the next recession. Transcript: "Just add, the drawdown on these defensive assets will be different. The way people measure defensiveness is often simply a historical price return. The reason why your bonds rather well at the moment is because they had a very good financial crisis relative to equity. What happened then is that although the spreads were going up, interest rates were going down quite quickly. That actually helped high yield debt perform in absolute basis reasonably well. What happens to high yield debt now when volatility goes up and spreads go up when you don't have the support being able to take 400 basis points of interest rates? It could be that people are investing in high yield fixed income thinking that it's safe, based on what happened last time. The opposite is true to value stocks. No one wants to buy value stocks because they had a horrible recession last time around. If you're around in the 1990s, late '90s to 2003, you know that value stocks spent two years derating after the Asian crisis so we're already pricing in a recession. When the recession turned up, they did okay. In fact, relatively, they're fantastic. I think that's the scenario we've got now. We've got a recession in bond markets to a certain extent priced in, you've got a recession in value stocks to a certain extent priced in, but you have the S&P near all-time highs and volatility well behaved. Actually, I think the mispricing is in the S&P and vol."
  • WW
    William W.
    25 September 2019 @ 23:11
    Absolutely fantastic interview! Thoughtful analysis, unique perspective, informative research.
  • Hv
    Hannah v.
    25 September 2019 @ 21:48
    Nice clean tight angle to today’s morass. I needed that. Thanks Andy and Roger.
  • AB
    Anne-Marie B.
    25 September 2019 @ 21:21
  • DR
    David R.
    25 September 2019 @ 20:12
    Wow that was amazing! Thank you!
  • dm
    david m.
    25 September 2019 @ 18:31
    Maybe I'm wrong, but it sounds like mid-smaller oriented convertible-arb strategy could fit with Andrew's views.
  • ns
    niall s.
    25 September 2019 @ 15:43
    Excellent and much appreciated summary by Roger.
  • IS
    Ionel S.
    25 September 2019 @ 14:19
    "diversification is protection against ignorance. It makes little sense if you know what you are doing." Warren Buffet
  • TS
    Taranvir S.
    25 September 2019 @ 14:06
    High quality stuff here
  • AP
    Adam P.
    25 September 2019 @ 13:20
    Excellent interview & insight. Loved it.
  • JB
    Jon B.
    25 September 2019 @ 12:32
    Great insight. Value vs defensive and bears being overweight on the defensive. Definition of value though: if look at the russel small cap where earnings outperform price, surely that's a function of buybacks (where most small companies have been stuffing cheap money) so we have to further delineate those stocks that exclude any buyback activity and only buy those stocks which havent leveraged their balance sheet in order to have a correctly balanced portfolio. Am I correct?
    • JB
      Jon B.
      25 September 2019 @ 12:36
      delete part of the sentence "where earnings outperform price"
  • MM
    Miikka M.
    25 September 2019 @ 12:20
    I really enjoyed this, especially the view on value vs. defensive and value vs. fixed income assets.
  • SW
    Scott W.
    25 September 2019 @ 12:09
    Simply brilliant. Explains so much of what/why classic value investors have experienced over the past few years. Love the coiled spring analogy coupled with the sheer honesty regarding the unpredictability of catalysts that release the coils.
  • RP
    Raoul P. | Founder
    25 September 2019 @ 11:41
    Fun fact. Andy and I were neighbours and friends in Liverpool when we were 5 years old... Andy has the photo's to prove it and put them on the screen at the Soc Gen annual macro conference when I was the guest speaker. Annoyingly, he is one of the most talented strategists in the world...
  • IH
    Iain H.
    25 September 2019 @ 11:16
    Excellent Interview. Great work Roger in digging into Andy's deep broad knowledge. Was so engrossed that when the interview wrapped up I was thinking it cant have been an hour already!
  • JS
    John S.
    25 September 2019 @ 10:50