Establishing Risk Trends Between an Unchanged SPX and Biotech Plunge

Talking Points:

• Risk benchmarks are projecting different views of sentiment

• Key benchmarks are steady or bouncing from technical support; while EM, high-yield and biotech are tumbling

• Divergent sentiment views are common in placid markets and during brief pauses in volatility circumstances

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Risk benchmarks are useful. They can offer up a quick review of sentiment without diving into market-wide fundamental evaluation. Yet, there are often times when a single bellweather provides a false negative or positive on risk. If for example we referred to the S&P 500, DAX or Nikkei 225 as our standardbearer for market confidence; it would seem the market is steady and perhaps even leading into strength with technical bounces from the latter two. Alternatively, looking at the Biotech sector, emerging markets or high yield assets; the view is decisively risk adverse. Discord between these various measures happens in two scenarios: when markets are dead quiet and guided by various other fundamental elements; or when volatility is high and we are transitioning through pause. Which better fits our markets? We review our risk bearings in this weekend Strategy Video.

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