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Wall Street Says a Volatility Doom Loop Is Gripping Markets

  • Risk parity, hedge funds are the suspects as swings get bigger
  • High volatility, low liquidity are self-reinforcing: Deutsche
Updated on

There have been plenty of scares in the market horror show of recent weeks, but one idea in particular is increasingly sending shivers around Wall Street: that extreme stock turbulence may now be feeding itself.

The fear is that recent epic swings could be happening because volatility-sensitive players like risk-parity strategies and fast-money funds are aggressively deleveraging, exacerbating moves and sapping liquidity.