Welcome to the Post-New Normal Era in Markets

by Larry Hatheway | February 15, 2018

Originally published at Bloomberg.com | February 15, 2018

Get ready for the post-new normal.

Recent market volatility reflects more than just an unwinding of positions or the failure of a few esoteric volatility products. The catalyst for the selloff arrived on Feb. 2 in the form of higher-than-expected U.S. wage inflation. Although a few data points aren’t conclusive evidence, it won’t be long before market participants begin to doubt the Fed can remain committed to “gradual normalization.” The implications of such a shift in sentiment cannot be overstated.

Yes, positioning and market structures have exacerbated market moves. The unwinding of consensus positions in global equities and in trades that would benefit from subdued volatility meant that losses in those markets were more pronounced than elsewhere. Oil prices were another positioning casualty.

But this was not a mere “risk-off” episode. Had it been, bond yields would have fallen, not risen. Continue Reading.

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Filed Under: Economics

About the Author

Larry Hatheway

Larry Hatheway has over 25 years’ experience as an economist and multi-asset investment professional. He is co-founder, with Alexander Friedman, of Jackson Hole Economics, a non-profit offering commentary and analysis on the global economy, matters of public policy, and capital markets. Larry is also the founder of HarborAdvisors, LLC, an investment advisory firm catering to family offices and institutional clients worldwide.

Previously, Larry worked at GAM Investments from 2015-2019 as Group Chief Economist and Global Head of Investment Solutions, where he was responsible for a team of 50 investment professionals managing over $10bn in assets. While at GAM, Larry authored numerous articles on the world economy, policy-making, and multi-asset investment strategy.

From 1992 until 2015 Larry worked at UBS Investment Bank as Chief Economist (2005-2015), Head of Global Asset Allocation (2001-2012), Global Head of Fixed Income and Currency Strategy (1998-2001), Chief Economist, Asia (1995-1998) and Senior International Economist (1992-1995). Larry is widely recognized for his appearances on Bloomberg TV, CNBC, the BBC, CNN, and other media outlets. He frequently publishes articles and opinion pieces for Bloomberg, Barron’s, and Project Syndicate, among others.

Larry holds a PhD in Economics from the University of Texas, an MA in International Studies from the Johns Hopkins University, and a BA in History and German from Whitman College. Larry is married with four grown children and resides with his wife in Redding, CT, alongside their dog, chickens, bees, and a few ‘loaner’ sheep and goats.

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