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Goldman Delivers Ominous Message: ‘Markets Themselves’ May Pose The Greatest Risk

"But we see several reasons to worry that 'markets themselves' are becoming a bigger source of market risk than fundamentals."

As the punditry continues to insist that because the fundamental backdrop is sound, nothing too bad can happen, people seem to have learned nothing (or very little) from the technical selloff that unfolded early in February. The events that transpired on Monday, February 5, laid bare the risks of modern market structure. The rebalance risk inherent in the structure of levered and inverse VIX ETPs was realized and amid the turmoil, liquidity seemed to be sparse. The concurrent VIX spike (the largest in history), triggered a cascade of de-risking from the same systematic strats that some folks have been warning about for years. By the time that was over, some $200 billion in equity exposure was forcibly unwound. While the bond selloff exacerbated by the above-consensus AHE print that accompanied the January payrolls report did indeed contribute and while there's certainly an argument to be made that the week prior was actually the critical week in terms of setting the stage for the rout, the events that transpired from February 5 through February 8 were quite clearly technical in nature and as such, underscored the inherent risks of what many believe is an increasingly fragile
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1 comment on “Goldman Delivers Ominous Message: ‘Markets Themselves’ May Pose The Greatest Risk

  1. Raskinreed says:

    Can somebody tell me what this odd non-green color is on my screen?

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