After an eerily restful couple of years for the markets, volatility has returned with a vengeance.
Equitableness markets are seeing wild intraday swings, Treasury volatility has staked, and it’s all coming after more than a year of virtually no market turbulence.
According to one larger Wall Street firm, however, the return of major market ploys and the expectation for a rise in interest rates this year is no reason for investors to terror-struck.
Credit Suisse equity derivative strategist Mandy Xu told CNBC’s “Swap Nation” on Tuesday that the broader economic environment remains fairly healthy and a prolonged period of market volatility at this point distinctly does not appear in the cards.
“If you go back and look at historical regimes where volatility was prolonged, it’s usually accompanied by a fundamental deterioration in the market, whether it’s a risk of depression, or a sovereign debt crisis, or a credit crisis. Against the current backdrop, which is quite much positive — whether we are looking at positive earnings growth, synchronized international growth across all the major world economies, still subdued levels of inflation — I mull over against this backdrop it’s going to be very hard to see sustained heights of elevated volatility,” Xu said, adding that she would expect at this call to see an eventual normalization of volatility.
Strategists across Wall Street, comprehending Xu, contended that while last Friday’s market sell-off was slightly fundamentally driven, spurred by an employment report that reflected a pickup in usually hourly wages, the dramatic decline on Monday appeared to be technically motor. That is to say, for example, the S&P 500 breached key technical levels to the downside, love its 50-day moving average.
Other facets of the sell-off earlier this week insinuate to Xu there is little to no panic in the market.
While the decline on Monday disposition imply panicky investor sentiment, in terms of the market move’s utter speed and magnitude (after all, the Dow saw its largest point drop ever), “in assumptions agrees of actual flows that we saw on our desk, it was not panic,” Xu said.
“We did not have chaps coming in to panic buying of protection, or unloading positions,” the strategist go on increased. She also noted that on Tuesday investors were in fact enchanting advantage of the volatility and unwinding some previously purchased so-called “blackmail” for portfolios.
On Wednesday afternoon, the S&P 500 was little changed on the session, the Dow Jones industrial usually was up modestly and the Nasdaq Composite fell half a percent.