Market Update: The largest volatility shock of the year
Description
Global markets have worked through their largest volatility shock so far this year with bravura as the dollar, equities and bond yields are trading like last Monday's historic sell-off never happened.
However, some things are unlikely to fully revert back as sentiment seems to have changed materially. Investors will remember the massive unwind of trades that had been popular all throughout 2024 for some time.
We see the legacy of the Monday shock from three different perspectives. (1) The Japanese yen has left the downside one way street, that saw USD/JPY appreciate by 23% since 2023. (2) The volatility scare has made investors more comfortable pricing in aggressive rate cuts from the Federal Reserve. (3) Equities will have a more difficult time finding all-time highs over the next few months as the path to a soft landing remains narrow and filled with uncertainty.
The second half of the year is likely to display less clear and straight forward trends than the first one.
Join macro analyst Boris Kovacevic as he breaks down this week's market news.
United States
