This week, we start with a quote that is quite relevant to financial markets today, the charts below and our overall investment strategy. Bridgewater Associates founder Ray Dalio reiterated in his most recent missive that as an investor one should "Identify the paradigm you’re in, examine if and how it is unsustainable, and visualize how the paradigm shift will transpire when that which is unsustainable stops."
The paradigm we’re currently in was recently laid out by JP Morgan’s quant strategist Marko Kolanovic in his most recent research piece which is summarized in this Bloomberg article.
He states that “While there is a secular trend of value becoming cheaper and low-volatility stocks becoming more expensive due to secular decline in yields, the nearly vertical move the last few months is not sustainable. The bubble of low volatility stocks versus value stocks is now more significant than any relative valuation bubble the equity market experienced in modern history.”