Surveillance: RBC Sees Misleading Calm in ‘Paddling Duck Market’
There’s a hidden risk to good economic news or a fast debt deal
The White House and congressional leaders are stepping up efforts to reach a deal on the debt ceiling.
Photographer: Eric Lee/BloombergSome people would describe this market as confounding. Others, somnolent (or boring.) But for RBC Capital Markets' Amy Wu Silverman, it's a “paddling duck” of hidden activity that risks upending Wall Street’s conventional wisdom.
“We’ve got this chill cool duck hanging out on the surface, furiously paddling underneath,” Silverman said. “That’s the equity volatility bit.”
For example, the concentration of this year’s gains in just a few Big Tech names makes the S&P 500 vulnerable to a selloff if they lose value, even if everything else rallies. This means an economic recovery could, ironically, be the catalyst for a selloff at the index level as investors pivot away from havens and into financials and other neglected sectors.