Two years of market swagger go missing in week of stock upheaval
BNN Bloomberg
The worst stretch of stock market volatility in a year left a relatively light mark on benchmark indexes, all things considered. But for risk appetites, the impact was deeper.
The worst stretch of stock market volatility in a year left a relatively light mark on benchmark indexes, all things considered. But for risk appetites, the impact was deeper.
Trader nerves were repeatedly raked, first by coronavirus angst then with a new tone of hostility from Federal Reserve Chair Jerome Powell. It added up to one of the bigger challenges yet to the unhinged buoyancy that has defined virtually the entire pandemic era in markets. Hedge funds weren’t waiting around to see how things turned out. They bailed at the fastest rate in 20 months.
Could it be another false alarm in a market that has tortured bears for two years? Yes -- big bounces on Monday and Thursday showed dip buyers remain unabashed, and nothing in the economy or monetary policy offers unambiguous reason for panic. But particularly in light of the rising resolve to fight inflation among central bankers, many sensed a change in the air after a year of virtually uninterrupted gains.
“The selloff has been a little bit deeper than I thought it would have,” Peter Cecchini, director of research at Axonic Capital LLC, said by phone. “Sentiment has shifted. We’ve moved from what has for 12 years been a buy-the dip-market into a sell-the-rally kind of market, because the support from the Fed, given inflation, is not going to be there.”
If it does turn out to be a moment of reckoning for markets, it comes at an inopportune time for those who have poured about US$1 trillion into equity funds in 2021 in anticipation of another year-end rally. Big finishes have been a safe bet in the past: the market has rallied in all but three Decembers since the global financial crisis.
