After a rapid ascent in January, market behavior dramatically turned to correction in February. Extreme sentiment and positions are considered to be the reason of selling off, but we believe it is more to talk. Overall, we consider the correction to be a healthy development for the market. It is not the end of stock bull market.
Low volatility across asset classes has likely ended
Volatility sustained extreme lows throughout 2017 across asset classes, supported by improving economic growth, tempered inflation expectation and abundant liquidity due to a weakening USD. The “Goldilocks” conditions have begun to fade in 2018, leading volatility to jump. However, volatility well above last year’s levels is just normal at the stage of the cycle as monetary policy normalizes.
Inflation and bond supply helped spark surging rates
Rapid increasing global rates is another reason for recent selloff in equity. Recent changing outlook of inflation and bond supply affects inves