25 Jun 2014
Market volatility indicators testing new lows in recent months - Deutsche Bank
FXStreet (Łódź) - Deutsche Bank Head of Global Fundamental Credit Strategy Jim Reid comments on Deutsche Bank's latest World Outlook report which focuses on the unusually calm trading conditions on financial markets in recent months.
Key quotes
"A remarkable calm has settled over global financial markets in recent months, with volatility indicators testing new lows, interest rates surprisingly subdued in the face of strengthening employment and inflation data, and risk appetite showing impressive signs of growth."
"The calm cannot last indefinitely, and the question at hand is whether the clouds on the horizon portend merely a late-summer squall or a potentially far more damaging tempest."
"The baseline forecast assumes the former —a manageable storm— with expectations for global growth remaining largely intact, with only a marginal downgrade to growth prospects in 2014."
"Since they last updated their view in March, US growth has been marked down by almost 1 percentage point this year, in response to cold weather and other transitory negative factors in Q1. Key risks to this view are that rising inflation pressures cause the Fed to raise rates even more rapidly, or that the market reaction to Fed exit is a good deal stormier than they assumed."
"An abrupt shift in market expectations could mean a wrenching adjustment for investors, with significant negative spillover to the economy. In this event, the Fed would likely pause or possibly even reverse course."
Key quotes
"A remarkable calm has settled over global financial markets in recent months, with volatility indicators testing new lows, interest rates surprisingly subdued in the face of strengthening employment and inflation data, and risk appetite showing impressive signs of growth."
"The calm cannot last indefinitely, and the question at hand is whether the clouds on the horizon portend merely a late-summer squall or a potentially far more damaging tempest."
"The baseline forecast assumes the former —a manageable storm— with expectations for global growth remaining largely intact, with only a marginal downgrade to growth prospects in 2014."
"Since they last updated their view in March, US growth has been marked down by almost 1 percentage point this year, in response to cold weather and other transitory negative factors in Q1. Key risks to this view are that rising inflation pressures cause the Fed to raise rates even more rapidly, or that the market reaction to Fed exit is a good deal stormier than they assumed."
"An abrupt shift in market expectations could mean a wrenching adjustment for investors, with significant negative spillover to the economy. In this event, the Fed would likely pause or possibly even reverse course."