It’s a question that continues to bother grey-haired observers. Pan-asset-class volatility has been absent for a long time but is now returning. Its absence made little or no sense because uncertainty should be the one feature of markets that can be relied on. Several observers have recently argued that hedge funds are the cause. Fitch says with some cogent arguments that leveraged liquidity is a key reason.
The absence of volatility is a mixed blessing. While conventional traders might like nicely trending markets, the more savvy are meant to relish market instability – that is, after all, when dislocations and opportunities become apparent.
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