Forex Strategy Video: How Do We Separate a Risk Pullback from Collapse?
• Risk appetite is a universal aspect of the financial markets and thereby its prevalence sets trends
• Correlations between many different asset classes and volatility measures are the best measure
• Volatility measures have natural lows, a fact which may tip probability scales to a future of turmoil
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Through the end of January, a risk aversion rout that began in the emerging markets and spread to equities and FX threatened long-established trends. Yet, the turn in sentiment and deleveraging of speculative positions proved limited. How do we assess whether risk trends are in control of the markets - and, more importantly, how do we know the fundamental theme will institute new trends to match its volatility? We look at measuring 'risk' more effectively and mark a troubling outlook for the markets going forward in today's Strategy Video.
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