An Early Assessment of the Market Rebound

As markets were experiencing sudden turmoil a month ago, I suggested five simple, readily available quantitative indicators that could help investors assess whether that bout of extreme volatility would be a transition to better-anchored financial markets in the medium term.

These measures can be a partial proxy for evaluating the health of a much-delayed and critical transformation for financial markets: ensuring a shift toward better fundamentals that underpin what has been predominantly a liquidity-driven outcome for the trifecta of market valuations, volatility and correlations. This change would coincide with investors’ move away from their faith that liquidity injections from non-commercial players (particularly central banks, which also provide comforting policy guidance) will continue to repress any and all bouts of volatility.