Wall Street Hedges to Stock Price Crash; Demand Disappears - Restoring Calm

The rice market drama that spanned several weeks has come to an end, and peace is everywhere on Wall Street.

　　Traders are being pressured to withdraw their dovish monetary policy outlook this year, but demand for hedging to protect portfolios from market turmoil has disappeared.

　　While fear fades due to option transactions of various sizes, from stocks to bonds, demand for hedging against stock price crashes fell to a low level for the first time in 9 years according to certain indicators. Bank of America (BoFA) cross-asset stress indicators suggest market calm.

　　Concerns spread to the market last month that policy interest rates would be higher and maintained for a longer period of time, and investors were building up hedging to prepare for a decline as stock volatility increased.

　　However, after that, sentiment changed due to strong corporate financial results and unwavering economic expansion. Investors are no longer hostile to the US financial authorities, which place importance on data.

　　Mike Zigmont, who is in charge of trading and research at Harvest Volatility Management, pointed out that investors should pay attention when overall asset stress levels drop this much.

　　After stating that “the lower the level of risk that is recognized, the greater the market response to shocks,” he explained that “it is easy to say and difficult to do, but what is important is to determine when fear or satisfaction from surrounding markets has gone too far, and move in the opposite direction on a moderate scale.”

* I am posting because I feel that I should be aware as an investor that excessive sense of caution is lost due to the fact that the market price has regained calm, and that there are concerns that they will react excessively due to some trigger (for example, the CPI on the 15th).

#CPI #VVIX