The recovery-less recovery: Global risk assets have had a testing week; at the time of writing, the S&P 500 is more than 8.5% below the record high it achieved...

The recovery-less recovery: Global risk assets have had a testing week; at the time of writing, the S&P 500 is more than 8.5% below the record high it achieved just a month ago. So why are markets rattled? The imminent conclusion of the US quantitative easing (bond-buying) programme has been cited as one cause, and geopolitical risks (Russia/Ukraine, Islamic State/Middle East, Hong Kong/China) and latterly global public health concerns (Ebola) have certainly done little to calm investors' nerves. Market liquidity in both bonds and equities is challenged at the moment, and those who were worried that the post-2008 contraction of the investment banks' and broker-dealers' balance sheets would eventually create a liquidity shortfall at some point may feel that the hens have come home to roost. Liquidity in high yield markets has been poor for some time (hence our decision to reduce exposure to that asset class in our multi-asset portfolios earlier this month). In currency markets, the US dollar's surge in Q3 was likely to provide a headwind for some risk assets... (VIEW LINK)