Saturday, 13 May 2017

Markets mixed, VIX and recession risk falls

Markets were mixed on Friday.

The S&P 500 fell 0.1 percent but the Nasdaq Composite rose 0.1 percent.

Elsewhere, the STOXX Europe 600 rose 0.3 percent but the Nikkei 225 fell 0.4 percent.

The CBOE Volatility index fell 1.7 percent to 10.42.

“No one really knows what it means to have such a low VIX at a time of such high uncertainty, rising rates, high valuations, and corporate profits that aren’t particularly strong,” said Jonathan Angrist, chief investment officer of Cognios Capital. “It is very unusual.”

Meanwhile, recession risk is also falling, according to Morgan Stanley, which places the probability of a US recession over the next 12 months at 25 percent.

“A stronger global backdrop and the delayed promise of tax reform have lowered this assessment from 30% previously,” wrote Ellen Zentner, a Morgan Stanley economist.

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