Summary

All this does not mean that a financial collapse is upon us, but it does mean that advisors must prepare investors for an increase in volatility. Violent asset move days like first post-Brexit vote days will occur again frequently and you need to prepare your clients for them. Every advisor must be watching the situation with European banks and especially Italian, Portuguese banks as well as Deutsche Bank. If DB’s credit spreads continue their ascent (they almost tripled since March 2015 to 211 bps now), the resulting volatility will affect every advisor, even if central banks manage to get equities under control again. Bonds and stocks are now disagreeing and when that happened historically, bonds have always won. Is this time different?

Daniel Satchkov is president of RiXtrema, a risk modeling and consulting firm, and creator of Advisor BioniX, the first risk-aware robo platform for advisors.

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