Useful charts and data points gathered together by Morgan Stanley’s strategists in a report dated Feb 11. Their understanding is that the rise in real yields has been the real trigger of the spike in market volatility.
Markets have been unnerved by rising interest rates in the US, with ripple effects around the world. The most staggering event has happened on the VIX market with a number of funds/ETNs making the headlines after having lost tons of money. What should investors take from these events ? A couple of reflections and interesting comments seen here and there. Continuer la lecture de « Putting Recent Market Sell-off in Perspective »
Volatility is the most disturbing factor in financial markets and it’s something people should always keep an eye on. Measured by popular metrics like VIX or VSTOXX, it’s assimilated to the « fear indicator » of investors.
Looking at the long past of the US equity market (S&P 500 in chart below), you can see that volatility goes in regimes that can change widely but rely mainly on macro environment (expansion/recession) and it’s impact on the psychology of investor (P/E or valuation).
Volatility in equity market in perspective
What would happen in the event of an unexpected French presidential race outcome (Le Pen/Melenchon in the 2nd round of the election) ? Nothing good, according to many market observers.
Citi has been trying to figure out what this would mean for financial markets. No surprise there, the unexpected outcome might be bad.
Investors hold firm to their Eurozone equities despite growing worries about the outcome of the French presidential election, according to the latest poll on investor positioning published by Bank of America Merrill Lynch.
Investors consider a « Le Pen Win » might produce a 5-10% market correction, but the real risk would be a Europe disintegration in the case of « Frexit », which would have deeper and far more negative implications.
With interest rates being negative for most of the bonds traded and issued around the world, the opportunity cost of cash is very high. But it’s probably the most valuable yet contrarian asset to own to help diversify risk in a portfolio.