NN IP: Higher bond yields scare investors - equity market volatility rises
Volatility has returned to markets, but some perspective looks justified. Implied volatility has only returned to its average level of the past year, or even the past five years. The recent increase has its roots in the bond market.19.09.2016 | 10:10 Uhr
Asset Allocation
Jump in bond yields scares investors
After a relatively long period of calmness, volatility has returned to the markets. Nervousness about the next policy steps of the US and European central banks led to a spike in bond yields, spilling over into the risky asset universe. The market moves support our preference for stocks positively correlated with bond yields.
Economic Outlook
Draghi’s job is not finished yet
Central bankers and markets are increasingly learning about the diminishing returns to unconventional monetary policy. Nevertheless, there is no doubt that the ECB will continue to do everything possible within its mandate to meet its legal obligation to attain and maintain price stability.
Equity Strategy
Back to school -- back to normal?
Fixed Income
Central bank purchases keeps market “put” in place
The “search for yield” is expected to remain dominant and unlikely to fade quickly. Not even the Fed’s next rate -- provided the hiking path remains gradual, as is expected to be the case – is likely to derail the current regime, one dominated by central banks that appear willing to provide financial markets with a “put”.