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Strategy Video: A Systemic Change in Market Conditions for 2015

Strategy Video: A Systemic Change in Market Conditions for 2015

2014-12-24 20:49:00
John Kicklighter, Chief Currency Strategist

Talking Points:

Record highs for US equities and a slump in volatility developed under precarious circumstances

Important changes in the financial system were already starting to take place in 2H 2014

In the New Year, look for volatility to increase, risk aversion to take and trading approaches to change

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Record highs in markets founded on record exposure to leverage and exceptionally low rates of return make for an ill-fated future. While benchmarks like the S&P 500 have chugged along consistently for nearly six years following the Great Financial Crisis, the foundation for this performance never fully set. The higher we reach, the more obvious the instability of the situation becomes. Market participants were already showing greater deference for these concerns in the second half of 2014, but the convergence of all the elements and damaging catalysts will more dramatically and permanently turn the current. This will result in more systemic volatility, greater correlations, rising volume, a focus on 'risk aversion' and a change in traders' approach to the market. We discuss the trading landscape of the New Year in today's Strategy Video.

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