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What Is The Current Market Volatility Telling Us?

Jeremy Josse profile picture
Jeremy Josse


  • The extreme volatility in the equity markets - a "jagged-shaped" price pattern - is a sign of a new market environment.
  • This type of phase is often the sign of a market in indecision and ready to change direction fundamentally.
  • With a too-long bull market, this volatility is an indicator of the end of the current market environment and will be a precursor to a new bear market period.

Whilst much chartism proves to be ineffectual and largely just a market ideology, some of it gives periodic insights into market sentiment. It does this often not on a stock-specific basis, but often more on a general macro market basis.

So what are we seeing in the macro market today? We are seeing “jagged teeth,” to use my own phrase; the market is in an extreme stage of volatility, with wide swings up and down nearly every day. The smooth(ish) and gradual rise in the equity market that we have seen for years now does not look like it is continuing. We are, in other words, entering into a new phase of equity market evolution.

What exactly is that? Well, essentially, a too-long bull run is tired and coming to an end. This is coupled with rising interest rates, both as a deliberate policy in short rates from the Fed and a natural back-up in bond prices on the longer end of the yield curve. The discount rate is rising. There is nothing intrinsically wrong with the underlying US economy (this is a moot point - but at least nothing quite as dramatic in nature as what we had in 2007-08). But cycles come and go, and this cycle is entering that phase which shows the sign of... old age.

Those “jagged teeth” are a signal of a market that has now lost its way and is in the beginning of a slow loss of confidence. It is a trend one notices for longer or shorter periods before many markets enter into a bull phase - one sees a period of indecision and high volatility.

This volatility is, therefore, I believe, the beginning of the end of the long bull run we have had since 2008, and will be a precursor to some period

This article was written by

Jeremy Josse profile picture
Jeremy Josse is managing director and head of the financial institutions group at Brock Capital in New York. He has spent the last twenty five years of his career working as an executive in some of the world's leading financial institutions, including Schroders, Citigroup, and N M Rothschild. He has specialized in complex restructurings and corporate finance issues in the banking, financial institutions and fin tech sectors. He has worked with banks, corporations and Governments throughout the U.S. and Europe. He studied philosophy and economics as an undergraduate at both Trinity College, Oxford University and as a graduate at London University. He also qualified as a banking attorney. He is the author of the Wiley published book "Dinosaur Derivatives and Other Trades" and has published numerous other articles on a wide range of financial subjects including the credit crisis, bank restructurings and financial engineering. Josse is a visiting researcher in finance at Sy Syms business school in New York. He lives with his wife, Muriel, and three kids in New York City.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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