Q3 reveals that the financial markets are in the thick of complicated and divergent market behavior. With world markets awash in policies around quantitative easing, the fed tapering and major central bank announcements. Capital market users and investors find themselves in a new market environment: One that seems to promise the return to “normal trading conditions.” What does a seemingly return to pre-financial crisis markets mean? Will this upward trajectory hold up in the months ahead? What does the end of risk on and risk off mean?
Each morning for the past four years, North American traders would wake, turn to their smart phone and check where the Hang Seng finished trading the previous evening and where the FTSE was at that time. With those two data points, most could likely tell you within 20 basis points where all the majors would be trading in a global market environment where traders were either risk accepting and were buyers of currency, or risk avoidant and were selling currencies in favor the of the Dollar, Yen and Swissy. The daily oscillation between risk on and risk off was constant and the level of correlation, if not outright causation, across financial markets was extreme.
Read the full analysis from Cambridge Mercantile’s top market analysts and strategists.
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