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Alternative Market Briefing

Other Voices: Market volatility is up, but is it here to stay?

Tuesday, March 01, 2022

Authored by Gerald Davis from Marrow Sodali, a strategic advisory firm.

As 2022 begins to unfold, the rollercoaster markets continue and investors try to gauge the potential impact of everything from Fed tightening, to the lasting effects of the pandemic, and geopolitical conflict like the Russia-Ukraine tensions. Markets are becoming more unstable, as evidenced by the recent fluctuation toward correction territory. Markets were down over 1,000 points, rebounded and stood unchanged at the closing bell on a single January day. This dramatic shift was reminiscent of March 2020, when the markets were up 1,000 points and down 2,000 almost every day. Although volatility has come in during February, January saw a push towards all-time highs with the volatility index (VIX) closing above 30 late in the month, compared with an average around 19.5.

Trading desks are factoring in the amount of increased leverage that built up over the past several years. With the predicted longer time it will take to unwind, many anticipate we've moved into a period where investors will sell the rallies rather than buy the dips. Also, Wall Street expects up to 40% increase in bonuses, indicating the volatility clearly was welcomed by trading desks. Commodities desks saw a far better year in 2021 than in 2020, while Fixed Income obviously struggled. However, as these bank bonuses are being paid out, they come with a warning not to expect the same in 2022.

Institutional Investors Reca......................

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