“It’s quiet, too quiet”, “the calm before the storm”, “the deep breath before the plunge” – you name the idiom, there is nowhere it applies more than US equity markets (lowest closing range in 65 years).
Dow has done nothing for 8 days… the longest streak since 1952…
However, if ever there was a catalyst for chaos, it is the collapse in uncertainty around the Chinese Yuan…
As Bloomberg notes, the eerie stability in the yuan is reminiscent of the period leading up to China’s unexpected currency devaluation in August 2015. The one-year implied volatility of the yuan has dropped to about 4.7 percent, from about 8 percent at the beginning of the year.
Investors should be worried: The surge in volatility triggered by the yuan’s sudden depreciation two years ago rippled across the world and set off a rout in equities and other risky assets.
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