So the markets are plummeting all around the world. But what is the underlying reason when core market fundamentals are actually healthy. Consensus indicates that there is a steam-roll effect caused by retail investor jitters. But what is it they are fearing? The panic and pull out, especially from equity based exchange traded funds (ETFs) seems ungrounded. The S&P500 fell by an unprecedented 4% yesterday. The Vix, or Fear Index, that measurement of market volatility, surged ahead. Meanwhile, the rest of the world caught a cold when the U.S. sneezed - markets in Asia and Europe saw similar falls, which continue this morning.
Experts are coming up with various explanations, but one common observation is that rising yields in US bond markets, which are finally responding to Fed expectations, can make equity returns less attractive. A bond-to-equity switch may be inevitable as retail investors revisit their portfolios. But note, for instance, the 10 Year T-bill yield is still lower than inflation.
Either way, panic selling is probably not the best way to respond. Bears may be sharpening their claws, but Bulls will be telling you that all the underlying economic fundamentals point towards a normalisation of the market
Via: https://invstr.com/