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Distortions have been created by easy money, misallocated capital, mispriced risk and excessive speculation
Market participants have largely normalised the exceptional distortions that have characterised financial markets since the global financial crisis (GFC). Until the first week of August, that is.
What set off the latest bout of market jitters and the outright fear that sent the CBOE volatility index (VIX) spiking to 65% intraday on August 5 is still a subject of debate. The Bank of Japan raised its policy rate to 0.25% on August 1, and the US Bureau of Labor Statistics released weak unemployment data on August 2, but ordinarily neither of these developments in isolation would be expected to cause the level of market disruption we have seen. For context, the other two major spikes in the chart below were caused by the financial crisis and Covid-19 pandemic. ..
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