Four Takeaways on #MarketVolatility [THREAD]
After the worst day for the S&P 500 since the financial crisis, $JPM Head of US Equity Strategy and Global Quantitative Research, Dubravko Lakos-Bujas, shares his view on the markets 📈📉
Read here 👇
After the worst day for the S&P 500 since the financial crisis, $JPM Head of US Equity Strategy and Global Quantitative Research, Dubravko Lakos-Bujas, shares his view on the markets 📈📉
Read here 👇
1⃣ Monday’s sell-off represents a “black swan” event, with the oil price war between Russia and Saudi Arabia turning an already fragile backdrop into a perfect storm for risky assets.
2⃣ The sharp sell-off is also symptomatic of a fragile market structure that can amplify price both downside and upside—a volatility shock coinciding with a collapse in liquidity and significant forced selling by systematic portfolios (that is now largely complete).
3⃣ The volatility comes against a backdrop of investors moving from equities into the safer haven of bonds. In the last month for instance, we estimate that retail and institutional equity fund flows have seen ~$40B in outflows.
4⃣ Historically, a market sell-off of this magnitude implied a 65-75% chance of a recession in the next year. However, in our view, the market has priced in too severe of an adverse scenario; assuming a timely, strong counter-policy response, & a peak of COVID-19 in coming weeks.
For more J.P. Morgan Global 🌎 Research insights and relevant disclosures visit: jpmorgan.com/global/research
