Prior to the completion of asset purchase program by the Federal Reserve just a few days, and already appeared on the market volatility, from which over the years to stimulate all already weaned.
On Wednesday, the American market once again showed a rapid decline. The S & P 500 for the day lost 1.3%, while of the last 9 sessions were growing just 2 It should be noted that the indicator has already struck two important resistance level at around 1,980 and 1,960 points. However, the American market began to fall one of the last. At other sites the situation began to deteriorate much earlier. This is especially true in emerging markets.
In Brazil, for example, just this week he has lost 7.6%. Of course, the fall factor is called the interim results of the presidential elections, where the current president, Ms. Rousseff has a strong lead, but it’s more just an excuse, not a cause. Fall as indices of Korea, Indonesia, and Argentina and all of Wednesday, the market collapsed by 10%.
The fact that the world markets could begin a serious downward movement, said several factors. Firstly, true indicator – the spread between the yields on corporate bonds and the yield of United States Treasury bonds – started to grow significantly and exceeded the maximum summer. Load and the so-called People’s indicator: the ratio of the price of gold to the price of silver. It is considered that if it reaches 70, the markets may start the collapse.
The situation is very similar to 2011, when the Fed completed by the summer program of buying assets. Then started to gradually increase rates LIBOR, again widening the yield spread, and eventually the markets collapsed. However, the formal reason was the downgrade of the United States, but the signs for the fall of the market given in advance, as, in fact, at this time. Note that then collapse on all financial markets was so strong that it was the time compares to 2008
But it is not even about the fall of indices, and about what volatility will soon be seen. It’s no secret that all of these were sent to QE, including the suppression of volatility, which is why it has recently reached their historic lows.
But now the cost of equity assets can begin to make such variations, that will not find anyone. If, in recent years an American market usually showed gradual increase, without any hesitation, then followed by fast and slow correction, after which growth continues, now daily fluctuations may be 1% or higher.
By the way, like we have seen in the last few days, yesterday and today may be replaced by a strong decline in growth. Quite unexpectedly today by strong growth rates of commodity sections, such as the Australian and Canadian dollars. They added to the dollar by 0.8%. Such dynamics may signal an increase in risk appetite, which means the S & P may well play a big part of yesterday’s losses.
Maybe today will grow up and the Russian ruble, though oil is still trading near the lows, and it may interfere with the Russian currency to rise.
Do markets life without QE?
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