EDITORIAL: Is winter coming for global markets?
Markets have had a memorable week. The question is whether the volatility is a signal of a new paradigm or simply a welcome correction
The past week has been a memorable one on global markets, but is it a signal of a new market paradigm or simply a welcome correction. Or perhaps even simply a technical accident? Perhaps the best example to illustrate the different arguments is the S&P 500, the global equities bellwether, which was as it happens the market that triggered the rout. This market reached a record level of around 2,873 on January 26 and spent the next three trading days falling like a stone, until it reached 2,645 on Monday, whereupon it turned sharply and ended the Tuesday trading session at 2,645. Monday’s decline was the biggest points fall on record, but really that means nothing because the higher the market rises, the larger any given percentage fall (or rise) will be in points terms. The argument that the decline was really a kind of technical accident lies in the fact that there was an abrupt surge on indices that track market volatility. The most famous of this is the Chicago Board Options Excha...
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