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Viral volatility: how Covid-19 is infecting sentiment

The stock markets are characterised by long stretches of calm punctuated by times of crisis – the most recent of which is the ongoing coronavirus pandemic. Amid the rapid global spread of Covid-19, worries about economic growth have intensified and equity markets have suffered steep pullbacks.

Against this current uncertain backdrop, Eoin Murray, Head of Investment, assesses volatility – the most obvious indicator of sentiment – as well as our complacency indicator. Watch the short clip now.

 

Recap: what is the complacency indicator? 

  • What does it measure?
    How sensitive equity investors are to general market conditions
  • What does it consist of?
    The US equities volatility index, or the ‘VIX’. We compare volatility high points to the sum of daily volatility readings from the start of a jump to its conclusion.
  • How to read it
    The complacency indicator is low when markets are fragile and higher when they are relaxed. The longer calm prevails, investors become more complacent and susceptible to another spike. 

To find out more about the complacency indicator, read our quarterly newsletter Market Risk Insights. 

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