---
title: "The unwinding of the Yen Carry Trade: a healthy correction or something bigger?"
description: "We believe that the current market correction is driven by technical factors rather than macro and fundamentals. The unwinding of the yen carry trade was an accident waiting to happen (see our June 2022 FOCUS note “Has Japan’s central bank created a monster?”). The heavy net long positioning by CTAs, the traditional low liquidity of August and the high valuation ratios of some crowded trades (e.g Mag 7) created  the perfect “summer cocktail” for pullbacks of major global equity indices and a spectacular spike of the VIX.\n\nAs explained in our FAQ, there is no reason to panic as macro and fundamental conditions remain favourable to equity markets. Still, history shows that stock markets remain bumpy in the 4 to 6 weeks which follow a spike in the VIX. As such, we’re keeping the current equity allocation unchanged (neutral vs. SAA) and adding some long duration bonds to portfolios as a diversifier."
---

[Slow food for thought](https://blog.syzgroup.com/slow-food-for-thought)

# [The unwinding of the Yen Carry Trade: a healthy correction or something bigger?](https://blog.syzgroup.com/slow-food-for-thought/volatility-and-rotation-ahead-0)

 Written by [Charles-Henry Monchau, CFA, CMT, CAIA](https://blog.syzgroup.com/slow-food-for-thought/author/charles-henry-monchau) | Aug 8, 2024, 7:10:05 AM

<https://blog.syzgroup.com/hubfs/Syz%20AAI%2095.pdf?hsLang=en><https://blog.syzgroup.com/hubfs/Syz-Downgrading%20credit%20from%20attractive%20to%20positive%20(1)-2.pdf?hsLang=en>

[View full post](https://blog.syzgroup.com/slow-food-for-thought/volatility-and-rotation-ahead-0)

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