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June 1, 2022

Where Did All This Volatility Come From???

There’s so much happening now in financial markets. I feel this is a good time to share my thoughts and insights and hopefully more consistently each month. While I know reading emails is not top on everyone’s list of enjoyable activities, through this Newsletter I hope to share an idea or two that you’re probably not going to hear from the mainstream financial news. Thanks for reading, please respond with your thoughts and opinions and I always appreciate you sharing this with others you feel can benefit from it as well.   Where Did All This Volatility Come From???   So what is going on with markets this year??? Just to put some numbers around it, less than five months into the year the S&P 500 entered the so-called bear market territory of down more than 20%. The NASDAQ 100 was down over 30% at its low, and long duration bonds have traded down as much as 20% with almost indexes reaching year to date lows all in the month of May. In my opinion this selloff has less to do with real economic factors like inflation rising and more to do with liquidity being taken out of the market. For those wondering, liquidity is just whether or not money is being added or taken out of the market. A good way to think about it is that after March 2020 with the fear of a covid pandemic the federal reserve pumped in liquidity with low interest rates and bond buying. Markets responded by rising prices...
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