Options traders are betting that the worst start to a year for global equities since 2009 isn’t yet over, while the MSCI All Country World Index hit a bear market, that is a fall from peak to trough of at least 20%, last week. The decline in the global stocks benchmark reflects the sense of fear that has heavily weighed on risky assets in recent weeks.
The 3 main reasons that explain investors’ nervousness are cheap oil prices, increasing fears of a global recession and the ability of global central banks to withstand those powerful forces. The sheer magnitude of these forces has left no stone unturned and even weakened credit markets. Now there is a feel among investors that the sell-off is overdone.
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