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Money Market FundsQuantitative models such as ETM Analytics’ ZAR Sentiment Indicator (ZSI) help to navigate a market characterised by a high degree of geopolitical uncertainty. Just last week, US President Trump called an end to the US-Iran ceasefire and launched fresh attacks on Iranian targets. Interestingly, the ZSI hasn’t budged.
As illustrated in the chart below, the ZSI dipped firmly into negative territory earlier this year as the lead-up to and the onset of war in Iran weighed on market sentiment and drove the market to hedge against ZAR selloff risk.
More recently, however, it has rebounded sharply, climbing back towards neutral.
It is noteworthy how calm the ZAR has been in the face of this year’s geopolitical shock, with implied volatility also reflecting reduced hedging demand (after an initial spike) since the war began in late February. This might explain why the ZSI has not turned lower in recent days despite renewed tensions in the Middle East.
