Institutional trading calendar

hello thank you for joining our discussion  today I'm Travis Bagley I head up our transition   Management Group here at Russell Investments  I'm also joined by Brian Cy who's in our overlay   Services Group and Paul idelman who's our chief  investment strategist here in North America um   before we start the conversation and get into  the questions I want to do a little background   and set up our tool maybe we can bring that up  on the screen um so as a transition manager um I   frequently get two questions um one is how much  is this transition going to cost and the second   question inevitably is is this a good time to do  the transition or we have a date in the future   we like to do the event does that make sense  and so we created this tool to help us gauge   and schedule implementation around holidays  around announcements economic releases things   like that to help clients understand and set  expectations for certain events um so with that   said um I'll also open up for questions can be  asked throughout the the webinar here so please   send in your questions um I will start with the  first question um as it turns out tomorrow is a   Fed announcement all um I hear it's a big one do  you agree uh I do agree uh for a couple of reasons   first this would be the fed's first great cut for  this business cycle so um that change in direction   is always important as a first step it also seems  like it's a more uncertain meeting than usual the   FED has a state of philosophy almost that they  don't like to surprise financial markets but   this is a meeting where I think a lot of investors  and economists don't really know exactly what the   FED is going to do on Wednesday are they going to  cut by a quarter point are they going to cut by a   half a point um markets are priced for that to be  pretty close close to a 5050 outcome on Wednesday   which is really unusual we almost always know in  advance what the FED is going to do on um decision   day so I think that creates an environment where  fed meetings always create the potential for some   volatility in financial markets but this one seems  like it has the potential for a little bit of an   extra kick if you will in terms of creating some  uh ups and downs in financial markets I think on   the trading calendar we do have the FED meeting  isolated and highlight as a possible event risk   in Orange on the page if anything maybe you'd make  it a darker shade of orange for this one because   it does seem like um it it's more important  than normal going forward I think we're going   to continue looking at fed meetings going forward  but if they can start to build a little bit of a   rhythm here around rate cuts and deliver something  like a steady moves at each meeting then that   extra layer of volatility or anxiety if you will  could start to diminish going forward but with   this being the first one I think it takes on  heighten importance tomorrow for investors for   sure and just for the participants that calendar  is available to all Russell uh clients they can   access it on our website um Brian Turn to You on  the overlay desk what are you seeing yeah I guess   as I think about Q4 there's a couple things  that come to mind first is an acknowledgement   that a lot of these institutions have month-end  activity as a regular course of business whether   it's monthly benefit payments or redemptions from  managers or fundings of new managers or Capital   calls and distributions a lot of that tends to be  bundled around month end so in Q4 you've got the   annual challenge of what's going on at year end  you've got Global Market holidays you've got early   closures on the end of December well at the end of  November you have the same problem the last day of   November is the day after Thanksgiving so this is  a a day you can expect fewer Market participants   and lower liquidity as they'll be distracted by  Family o ations and Black Friday sales and it's   also an early close that day so while as a normal  course of business you can trade on those two   month end days but if you have something fairly  complex or large or give a lot of lines of fixed   income bonds to trade those aren't going to be  your best days to trade if you have the option   to pick a different day we'd suggest doing so now  the other thing that comes to mind uh related to   Q4 is Bank funding stress now this is a more of a  global modern uh economic phenomenon if you will   stemming from the global financial crisis in  which Regulators look at the funding ratios of   these Banks to gauge their Bank Health at year end  now this comes to play in the derivatives Market   where you see an increasing premium for going  long Equity derivatives whether it's futures or   Total return swaps and that premium gets ever  more expensive as you head into the final days   and weeks of year end now on the flip side if you  were interested in going and drisking and going   short in equity fut contract or a total return  swap you can actually expect to get a bigger   discount heading into year end now the point here  is that if you are planning to go long and and you   might have to face that premium if you can get  in earlier rather than at the last minute you   can expect to have some cost savings that's good  um as far as looking out the fourth quarter Paul   um anything that you the participants might want  to know about or should be concerned about yeah   so we look at a a range of possible volatility  Catalyst for our institutional clients and that   spans across not just sort of the economic data  and releases but uh possible political events and   and major corporate earnings announcements amongst  um other issues as I kind of think about um the   picture into the fourth quarter of this year I  think uh the US economy is going to continue to be   a major Focus for investors but the specific watch  points I think are starting to shift a little bit   in terms of points of emphasis um for the better  part of the last two years now I I feel like the   inflation data out of the United States and most  of the developed markets has been kind of the tier   one indicator driving volatility and fixed income  and Equity markets because you know we came off of   that major surge in inflation in 2021 and 2022 and  so that was a major uh risk driver into financial   markets that picture is starting to change a  little bit the inflation rates not only in the   United States across most of the developed worlds  that started to moderate pretty significantly not   quite all the way down to Central Bank targets  but a long way down and so that's fading uh as a   risk driver somewhat and more recently what we're  starting to see is business Cycles slow a little   bit particularly out of uh the labor markets in uh  the United States or Canada for that matter where   job growth is slowed we're seeing unemployment  rates start to rise a little bit so I think the   question shifting now away from from inflation to  more growth and recession concerns and so I think   with that as a setup or a context in mind some  of the key watch points for us going into the   fourth quarter really key into what's happening  with um the US Labor Market so we obviously get   employment reports out of the United States um  every single month uh we have those coming up   on October 4th uh November 1 and December 6 so I  think those are going to be really um key drivers   of potential volatility in financial markets  going forward from an economic perspective um   and then around politics uh obviously uh to No  One surprise there's a big election coming up   here um in November with uh the the results in uh  election figures getting tabulated on on November   5th that's one where we know the event risk itself  is on the 5th but it can take some time to count   all the votes across states in the United States  particularly as investors are thinking about the   balance of power in Congress which can be quite  important particularly in fixed income markets   where there's a lot of focus around whether or not  we'll have a way of election and kind of continue   aggressive fiscal policy or maybe Congress will be  split and moved into more of a gridlock regime uh   and so I think that'll be a really consequential  watch point to have our eyes on as we move into   the the fourth quarter uh and then from time to  time uh this isn't always the case but sometimes   we'll put a focus onto corporate earnings  results when there's uh a major release   on the cards sometimes that can be around periods  of banking stress we'll focus in onto those early   results from um the big banks for example right  now there's a lot of investor interest into the   idea of Market concentration the Magnificent s  the rise of companies like uh Nvidia that have   uh really performed strongly over the last couple  of years and so as we move into the fourth quarter   for example Nvidia reports their earnings results  on November 26 as Brian was mentioning that's not   too far away from the Thanksgiving holiday period  and normally pretty light period for liquidity to   begin with so I think that could be a volatility  event as well for more of a a corporate earnings   perspective as we move into the fourth quarter  good interesting um I'm GNA change subject here a   little bit because one of the questions came in um  but I'm gonna talk about holidays everybody loves   a good holiday right get the day off but they  do create problems for International or Global   um transitions or events um Brian how can you  use derivatives or the overlay program to help   manage around those holidays yeah the most common  contracts that we trade are us Equity Futures and   US Treasury future so think of the S&P 500 futures  contract or the 10year US Treasury future now   these trade incredibly they're incredibly liquid  during Us hours and even after hours essentially   trade about 24 hours a day from Sunday afternoon  to Friday afternoon now you can even trade these   on holidays uh Market is open that day you're  going to expect less liquidity you'll pay more   in bid ask spreads but you can execute that  day now those trades will have uh the trade   date assigned of the following business day which  may not be much of a consideration for a portfolio   management or exposure management perspective but  it might be a consideration for some institutions   regards to reporting or accounting now um Futures  contracts are great for hedging these risks   uh I mentioned that those contracts can trade  overnight and I think one consideration I'd like   to flush out is this overnight Gap risk that most  institutions are facing when they're doing a big   change whether it's on holiday or whether it's not  the overnight Gap risk is that difference between   today's closing price and tomorrow's opening price  a lot can happen overnight as we've seen just in   recent history I mean consider back to the 2016  presidential election in which the results of   that weren't known to late in the evening and  that was a very volatile night uh in terms of   Futures contracts pricing fast forward to covid  and Global pandemic and lockdowns a lot of that   news was coming out overnight Russia's invasion  of Ukraine geopolitical events in the Middle East   even the most recent volatility Spike with the  unwind of the UN carry trade that was overnight   too a lot of this happens while you're sleeping  furthermore as Paul was alluding to you've got   these economi c announcements coming out at  5:00 a.m. our time Pacific 8:00 a.m. eastern   jobs reports inflation reports there's an  increasing interest in monitoring those   reports as this imminent fed pivot which likely  is tomorrow but people are very interested in   these reports because they want to know when and  how much the fed's going to be easing all of that   is happening in between the close and the open  if you have the ability to hedge that risk which   is a non-material risk and Futures contracts  being so inexpensive and capital efficient   to trade we'd recommend doing so good and and on  the holiday front the question was what's one of   the most difficult holidays to to manage around  and I can answer that one directly uh just from   uh markets open and managing exposures uh the  Christmas New Year's holiday is difficult um   and there's a couple of reasons for that one is  liquidity and markets are closed U particularly   New Year's which is a global holiday the one and  only Global holiday um but Christmas um a lot of   Europe shuts down obviously the US shut down as  well so managing around that is difficult but the   other practical aspect that gets overlooked  is there's a lot of people taking vacations   right so you know you look at your custodian your  managers all the people you need to work with in   a transition you may not have the A Team right  you may have the B Team um and there's just a   lot of work to get done and that that problem is  not going away we all know we all need need to   do more with less and the custodians we're seen  at the custodians we're seen at the managers um   so that problem will not go way anytime in the  near future so I'd say that Christmas holiday   New Year's is by far probably one of the more  difficult times uh to do implementation I know   clients like to do that because it's a nice fresh  start to the new year but you really think about   doing that earlier in December to get yourself  where you need to be before those holidays start   thanks Bri um so as we talked about holidays uh  some of the what you're doing on the derivative   side are there any other interesting derivative  strategies that you see your clients using   yeah there's been a spike this year in doing non-  Delta one option strategies so think of a typical   investor here that might be concerned more about  the downside than about the opportunities for   upside but they don't want to sell their stocks or  or bonds instead they can use an option contract   to hedge the tail risk of of a potential downside  event if hey I've had a good run this year maybe   I'll lock it in for the rest of the year  maybe I'll lock it in through the election or   longer period of time puts like and put spreads  are trading at historically attractive levels   because volatility has been low for the most part  all year long and skew is elevated so you can get   historically attractive pricing there so I'd say  that's one of the main reasons one of the better   strategies we've used recently I'd say we've  also seen an increase in having an always on tail   hedge uh we haven't seen a lot of asks for this  until just this year but if you can uh basically   put on option structures that have a low cost but  a high convexity and that convexity will help pay   off when there's a volatility Spike you can put  something on like that that would help protect say   a one in 10e tail event as we've seen in the 21st  century good um another question that just came in   was uh how much can costs increase during volatile  uh Market periods and I can answer that one a   little bit as well but what we've seen is um you  know all costs in transactionally are models so we   have these models that help us develop understand  what the costs are in transactions um we saw let's   uh we'll take the global financial crisis what  was happening during that period of time um costs   in some cases were as much as three times as as  as high as they were in normal times um and the   reason being is volatility drives bit offer spread  it drives Market impact costs and so as that   volatility increased you saw increase in costs um  and I'll differentiate a little bit between fixed   income and equities on this because on the equity  side of the equation volatility actually creates a   lot more volume so you can actually get a lot done  it's just more expensive to do it generally at   that point in time um on the other side of it the  fixed income side you're talking credit markets   the esoteric credits municipes those markets start  to get very illiquid during volatile times it's   hard for dealers or counterparties to take risk  on um it's very expensive and offer spreads get   really wide but it's just carrying that risk  becomes very difficult for those Banks or   counterparties at the point in time and so it's  hard to get things done there are times where   we've had fixed income events where basically we  couldn't trade a lot of the portfolio because it   just wasn't available and the marks that we were  seeing were so far from value we had to pull back   a little bit there so there is a big difference  between um equities and fixed income and those   volatile Market markets as far as liquidity  but you can just assume that your cost can   be significantly higher um when when volatility  picks up yeah I probably add a couple things to   that on the derivatives space so when volatility  spikes you probably have a less of a premium to   go long in equity exposure so right now there is  a premium because there's so many asset managers   that are long derivatives exposure right now long  Equity so when volatility spikes equities go down   that premium goes down as well in derivative space  on the fixed income side uh you have a lot more   volume going into treasuries you have a lot more  derivatives in CDX so credit derivatives as people   rush to trade something that they can trade as  opposed to trading physical credits so you see an   increase there as well um and we got a question in  uh are there any days in 200000 your remain 2024   that would you should completely avoid and um with  the exception of probably the election day or the   day after uh I don't think there's anything you  should completely avoid and uh probably good to   to clarify this the calendar that we're providing  really gives you a gauge or a schedule to help you   set expectations um are there good days and bad  days uh to start an implementation um potentially   there are but we just want to set expectations for  folks and so if you need to trade on a certain day   and I know there are certain investors 40 act  funds DC um you know funds that you know they   set a date and that's the date they're going to  trade um you can still trade on those dates as   long as you have the expectation of okay we have  an a Fed announcement coming out that day so we   should expect some volatility or we have a holiday  International here that's going to create some   challenges and maybe we need to use derivatives to  help us manage around that and so that's the the   point that's the the benefit of the calendar it's  not going to tell you don't trade on this day or   do trade on this day it's just going to allow you  to set expectations and so I would say there's not   a day that you can't trade or that you shouldn't  trade but you should take into consideration all   of those factors and maybe looking out a little  bit further maybe into 2025 right um Paul I don't   know if you have any thoughts on things to watch  forward for 2025 as we go into the new year after   the fourth quarter yeah I think um a lot of  the key Focus areas for us will continue to be   important into the new year as well we're going to  continue to focus on and look at uh the employment   reports as volatility Catalyst we continue to  look at what uh the FED is doing with their   interest rates is there a macro risk or interest  rate risk angle there around news releases um one   wrinkle as we start to move into 2025 that's been  put on the back burner for recent months though is   on um the fiscal side where um the US Congress  put into in place a um suspension of the debt   ceiling when they negotiated an agreement on that  many months ago um that suspension uh terminates   at the start of 2025 and there's an expectation  that the treasury Department can kind of kick   off Extraordinary Measures again and run down  their cash balances to keep the government going   for a period of time but I think as we start to  get closer to the spring period of 2025 that uh   thorny thatb SE issue that never seems to want  to go away could make another come back again   and create some kind of additional fiscal noise  on top of the normal sort of macro incorporate   fundamental type landscape uh as a volatility  Catalyst for investors interesting and maybe   coming back to the election again kind of our um  uh interpretation or what we think the risks are   around the election um coming up in in November  uh potentially right before that or right after   that would we expect to see most to the volatility  regarding the the election or is it too hard to   predict at this point in time as of right now  um the prediction markets in the polling is so   close that we're not seeing a lot of sort of EX  an Market volatility around the ups and downs of   the election that could certainly change as we  get closer to uh November 5th it's normal for   um liquidity to maybe dry up a little bit ahead of  the event as investors kind of lock in positioning   and wait to start to see the results I think  uh going into the evening of the fifth itself   as results come in and with that potentially  continuing into the sixth and seventh I think   that is likely to be um a key moment for investors  and you have a lot of things happening at the same   time there where there's actually a November fomc  meeting on the 7th right after the election so a   lot going on there from our perspective around  what uh fundamentals actually have the potential   to change in November I think it's a key Focus  around fixed income markets around the fiscal   trajectory of the United States and government  spending the impact of that onto the longer end of   the treasury yield curve in particular would be a  focus and then there's a lot of even if it doesn't   move the equity Market that much in the aggregate  there's a number of equity sectors or styles that   demonstrate a lot of sensitivity to interest rate  Dynamics for example the most obvious one being   uh the utilities sector that trades a lot like  uh an equity Bond if you will and so I think   that's going to be quite important not just on  the fifth but for a couple of days on other side   um interesting question came in as well we talked  a lot about fed announcements um what jobs reports   and earnings announcements talk touched on that  a bit CPI I know was a big number but becoming   less of an issue of these announcements which  ones should clients be most Focus um it's it's   time varying to a degree as I was trying to  allude to before the the major macro drivers   onto markets can evolve over time so we've shifted  from inflation being the primary focus now concern   centering more around growth so as of today right  now conceptually and I think what we're seeing in   terms of Market action is a greater emphasis on  um the jobs reports driving uh a recalibration   of inv attitudes uh towards uh Equity markets and  fed policy for that matter because fed does have   a dual mandate that's not just inflation but um  employment as well my best sense right now now is   that that focus is likely to continue but we have  a few tricks that we use to try to stay on top   of this there's a number of different um options  vehicles that can show us how markets are pricing   uh volatility risk ahead of events and um thus far  the data is showing a similar narrative to what I   just talked about where there's a lot of Step UPS  in implied volatility ahead of inflation releases   for the better part of the last couple of years  we actually haven't seen that for the last month   or so around the CPI announcements increasingly  uh we're seeing that now more so for um the FED   decisions I think again one tomorrow is likely  to be a more significant one than than normal   given it's the right so first move for the cycle  but also these employment releases as well and   even secondarily sometimes if markets get spooked  by a jobs report then everyone kind of goes down   to the the nerdier second tier data releases and  we'll look at initial jobless claims or a whole   bunch of other figures to really try to help them  resolve uncertainty when um conditions start to   get a little bit more opaque but yeah best guess  right now is really the labor market and the FED   that are key in inflation sort of fading Anis  yeah and I think that's an important point about   the calendar and what we created this is it's  a new tool we're developing it still um but as   we've found out as we go through time um certain  numbers become more important and relevant than   other numbers and so it's important for us as we  build this calendar out that we take into account   well this was important maybe last quarter and  the last two quarters but these numbers are now   becoming more important and let's make sure we  highlight those to our clients so if they are   doing implementation um they can they and at least  set expectations around this um one other thing   point to add on here is um on the holidays again  back to holidays uh the Christmas holiday this   year falls on a Wednesday which uh is is probably  the most difficult day from just an implementation   because now you've kind of have some people are  going to be out probably the before that right um   and then you have some that going to be out after  so liquidity on that whole week is probably not   going to be great going into the end of the year  there'll probably be good break after that where   you could get some things done just before the  New Year's um and and before you roll into 2025   but that that Wednesday date for for Christmas  uh is a bit challenging you like to have it on   a Friday right I like to have it on a Monday  three-day weekend uh but we're not going to   get that this year so um just something to take  into consideration um let me see if there's any   more questions coming in from anyone no okay well  I think we can probably wrap it up here uh want   to thank our our participants who joined us today  again we have this calendar out there for you to   use um and schedule set expectations uh around  your events around your transitions around your   large implementation we're always here to help  um if you need anything um reach out to your   Russell representative um and they'll point you  to the right people thank you for your time today