De-Risking Revisited
The prices of a wide range of risky assets have been rising, despite sluggish GDP growth worldwide. This discrepancy portends a new period of asset-price volatility – one that could mark the beginning of a broader de-risking cycle for financial markets.
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NEW YORK – Until the recent bout of financial-market turbulence, a variety of risky assets (including equities, government bonds, and commodities) had been rallying since last summer. But, while risk aversion and volatility were falling and asset prices were rising, economic growth remained sluggish throughout the world. Now the global economy’s chickens may be coming home to roost.