​​Janus Henderson’s US-based Multi-Asset Solutions Team present their latest Tail Risk Report, using options market prices to infer expected tail gains and losses for each asset class. Now that the ‘Fed Put’ is back in play, this report takes a look at how options market signals are positioned.

Key takeaways:

• The options market has revised its view on the attractiveness of equities. Despite the fact that February tail-based Sharpe ratio of gains and losses were lower than at the start of January, equities are still viewed favourably at just above average historical levels.
• The key threat to the recent rally in risk assets is inflation, which US Federal Reserve Chairman Powell emphasised is the pivotal trigger for any potential policy tightening.
• It is important to focus on risk management and proactively monitor for signs of an awakening bear or a persistent bull in a market filled with contradictory data.