Embrace Uncertainty to Navigate Market Volatility

The market currently exhibits an unusually low risk premium due to high certainty about future outcomes, particularly regarding inflation and economic conditions. However, as uncertainty grows regarding potential changes in these outcomes, volatility is expected to increase. This heightened volatility will necessitate a reassessment of asset pricing, leading investors to demand lower prices to compensate for the risks associated with an uncertain future. Thus, the market needs to adjust to reflect this emerging volatility and its impacts on asset allocation.