The US equity indices are at all time highs and investor enthusiasm for stocks is being driven upwards by pretty good American economic data such as Friday’s non-farm payrolls employment report for May. The CBOE VIX Volatility index also known as the “fear index” fell over 8% on Friday to 10.83, its lowest level since February 2007. In 2007 it may have been ultra low but the VIX subsequently jumped up during the 2008/2009 financial crisis. In October 2008, the VIX was at around 80 by comparison.
The upward push in share prices seems unstoppable right now, with investors taking further reductions in the Federal Reserve’s asset programme in their stride and welcoming efforts by the European Central Bank (ECB) to boost demand by lowering interest rates.
But some are saying that low trading volumes and hugely positive sentiment as expressed by the very low VIX is a precursor to an impending crash just as in 2007. But for now there are no signs of a catalyst like the sub-prime lending crisis which meant that shares fell off a cliff in 2008/2009 as the world’s banking and financial system came to the brink of collapse resulting in unique central bank intervention to prop things up.
There seems to be no real reason to rush head long into buying at these levels but apparently nothing alarming which would make you want to sell everything in case you miss out on further increases. Will economic growth in the United States continue without Federal Reserve stimulus? Probably, but corporate earnings have plenty to deliver to keep the band wagon going at this rate.
The markets seem a little too benign right now…..markets never go up in straight lines but the correction to pick up bargains may be a long time coming. The last opportunity in February, coinciding with the problems in the Ukraine was a short lived sell off particularly in emerging markets which have bounced strongly. With the world economy you can never tell when the next shock will come from but at the moment the markets seem to be riding through very calm waters. The catalyst for the next sell off could come from anywhere – China for example.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
US markets at all time highs with ultra low volatility – will it last?
Jun 8, 2014 at 1:47 pm in Market Commentary by contrarianuk
The US equity indices are at all time highs and investor enthusiasm for stocks is being driven upwards by pretty good American economic data such as Friday’s non-farm payrolls employment report for May. The CBOE VIX Volatility index also known as the “fear index” fell over 8% on Friday to 10.83, its lowest level since February 2007. In 2007 it may have been ultra low but the VIX subsequently jumped up during the 2008/2009 financial crisis. In October 2008, the VIX was at around 80 by comparison.
The upward push in share prices seems unstoppable right now, with investors taking further reductions in the Federal Reserve’s asset programme in their stride and welcoming efforts by the European Central Bank (ECB) to boost demand by lowering interest rates.
But some are saying that low trading volumes and hugely positive sentiment as expressed by the very low VIX is a precursor to an impending crash just as in 2007. But for now there are no signs of a catalyst like the sub-prime lending crisis which meant that shares fell off a cliff in 2008/2009 as the world’s banking and financial system came to the brink of collapse resulting in unique central bank intervention to prop things up.
There seems to be no real reason to rush head long into buying at these levels but apparently nothing alarming which would make you want to sell everything in case you miss out on further increases. Will economic growth in the United States continue without Federal Reserve stimulus? Probably, but corporate earnings have plenty to deliver to keep the band wagon going at this rate.
The markets seem a little too benign right now…..markets never go up in straight lines but the correction to pick up bargains may be a long time coming. The last opportunity in February, coinciding with the problems in the Ukraine was a short lived sell off particularly in emerging markets which have bounced strongly. With the world economy you can never tell when the next shock will come from but at the moment the markets seem to be riding through very calm waters. The catalyst for the next sell off could come from anywhere – China for example.
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.