FT News Briefing Stock market fragility
Dec 1, 2021
Robin Wigglesworth, Global Finance Correspondent for the Financial Times, shares his insights on stock market fragility. He discusses how low interest rates have led to increased investor risk-taking, contributing to market volatility. The conversation touches on the challenges posed by rising interest rates and inflation, and the potential for unexpected corrections. Additionally, Wigglesworth comments on Inditex's leadership transition and Morrisons' innovative move to create carbon-neutral eggs, reflecting broader trends in retail and sustainability.
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Market Fragility
- Market jolts are less frequent but more intense due to high-frequency and algorithmic trading.
- This makes markets react quickly to sentiment shifts, increasing fragility.
Volatility Trends
- The VIX, which measures expected volatility, shows increasing volatility spikes.
- The VVIX, measuring VIX volatility, has been trending upwards for 20 years.
Central Bank Intervention
- Low interest rates encourage risk-taking, creating a market bubble.
- Central bank intervention creates a cycle of risk and quick rebounds.