Markets Are About to Get Ugly According to These Charts
- Bullish U.S. trading threatened by overextended optimism
- Volatility, drawdowns tend to follow extreme points in indexes
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Optimism has peaked, according to two widely followed measures of U.S. economic sentiment. If history is any guide, bouts of equity volatility and plunging Treasury yields will soon follow.
The U.S. Citi Economic Surprise index -- the rate at which data exceeds analyst expectations -- has started to fall after reaching a five-year high in December. Meanwhile, the Federal Reserve’s index of the public’s uncertainty about the outlook for monetary policy is climbing after reaching a three-year low in November.