- a mere 0.2% move in the 10-year yield unnerves financial markets
- computer-powered algos that trade scale exposure on volatility accelerate selloff
- huge squeeze on leveraged short volatility positions (e.g. long ZIV, Oct 2 CFTC data shows 2.6x more short leveraged VIX positions, Barrons forewarned clients to avoid short volatility positions in “calm market”
- fears and declines in emerging markets, coupled with rising uncertainty associated with trade protectionism (e.g. tariffs) permeate
- stretched valuations in tech and concomitant early selloff in small caps
Bullish Case:
- Equity fundamentals remain strong
- Oversold market full of bargins
- Upcoming earnings season could fuel recovery