From black swan to bubble: as virus concerns fade, investors worry about a melt-up by IraIosebashvili meganbadavies
NEW YORK - When worries over the coronavirus shook U.S. stocks out of a period of quiet trading last week, investors wondered if the outbreak was the “Black Swan” event that would trigger a sharp decline. Less than a week later, talk has turned instead to a market melt-up.
The sharp snapback has revived concerns among some investors that market participants are growing overly confident that easy money policies from central banks will underpin prices, despite serious risks to global growth from the coronavirus. “We did put some equity call exposure in the portfolio coming into the year, because if one of the risks is a bubble developing then why not try to participate?”
“Every time there’s been a downturn in the market, the Fed has stepped in to ease,” he said. “Investors have been trained in a Pavlovian manner to not assess risk and buy every dip you get.” “My client conversations are all about, ‘is this the black swan? Is this what can derail the global expansion?” said Torsten Slok, chief economist at Deutsche Bank Securities. A “black swan” event refers to an unforeseen occurrence that typically has extreme consequences.Investors will worry if China extends shutdowns or expands them to other areas, said Jens Nordvig, founder of analytics firm Exante Data.
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