Investing Experts Liquidity flows, volatility shocks
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Sep 8, 2025 Michael Kramer, a macro trends and market volatility expert from Reading The Markets and Mott Capital Management, dives into the impacts of trade wars on market dynamics. He explains the difference between implied and realized volatility and discusses strategies for protecting portfolios amid uncertainty. Kramer also highlights the Federal Reserve's potential pivot on tightening policies, the significance of the reverse repo facility as a liquidity signal, and the cautious approach investors should take in the current climate.
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Volatility Is Rate Of Change, Not Direction
- Volatility means rate of change, not just market declines; it can occur with up or down moves.
- Both realized and implied volatility spiked after the sharp 2025 sell-off and then reset as moves narrowed.
Treat Implied Volatility As A Forecast
- Use implied volatility as the market's bet on future realized volatility when considering option strategies.
- Michael Kramer notes implied vol fell before realized vol peaked, so shorting implied vol can be risky if timing is off.
2018 Pattern Could Repeat Under New Tariffs
- 2018 saw a volatility spike, a subsequent melt, then another ramp when hard economic data worsened.
- Kramer draws parallels that tariffs and Fed policy can trigger similar multi-stage volatility today.