“People are quite happy to leave,” founder and chief executive officer of the Edinburgh-based firm said. “Liquidity is a bit lower so often fund managers will try to cut risk and harvest a bit of profit.”
The market is giving the green light to slumber this summer. Thanks to stable monetary expectations, economic expansion and corporate earnings growth, volatility premiums across assets are plumbing post-February lows. At 13.1, the VIX Index still sits below its five-year average. Such expectations of serene trading could be upended in a jiffy.
And August has a way of raising blood pressure for traders who dare not leave their post. In equities, it’s the most volatile month, with the VIX gaining an average two points in the 31 days. Meanwhile, the JPMorgan FX Volatility Index and Merrill Lynch’s MOVE Index of Treasury volatility see their second-biggest monthly uptick on average, in data going back two decades.
For Craig Erlam at Oanda Corp., despite the potential for a shock, his plans are set in stone.
“I’ve got a baby due on the 9th of August so I can’t cancel that,” said Erlam, a senior market analyst at the London-based firm. “Still, vulnerability in markets and liquidity can be a concern, though it doesn’t necessarily mean a shock is going to happen.”
This article was provided by Bloomberg News.