September 14, 2021

Different regimes yield different correlations and rates of return among variables and asset classes. As the new regimes are implemented, a different set of policy mixes is adopted. One can view the implementation of the new policy initiatives as a continuous set of impulses or shocks impacting the overall equilibrium of the economic system. The sustained impulses, i.e., policy initiatives, ultimately leading to a new steady state. The regime change generates a turning point that also leads to a new relationship among the rates of return of the different asset classes. Viewed from this perspective, the regime change presents new opportunities as well as potential risks or pitfalls for portfolio managers who are slow to adjust to the new environment. It behooves investors to understand and possibly anticipate the turning points and new correlations that a regime change may bring about. A portfolio manager that correctly identifies and anticipates a turning point can position his or her portfolio to take advantage of the changing economic environment created by a regime change.

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format