Wall Street strategists warn market volatility is not over yet

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Yen Carry Trade News

Ed Yardeni,Volatility,CBOE Volatility Index

Wall Street strategists advise investors to brace for more volatility ahead.

The markets closed out a wild week just below the flatline as a sense of calm returned to Wall Street.

Yes, the recovery is encouraging, but investors shouldn't jump to the conclusion that we're in the clear. Instead, proceed with caution as top Wall Street strategists tell me we're not out of the woods yet.. The trade — where investors borrow at near-zero interest rates in the Japanese currency then put the proceeds into higher yielding assets like US stocks — is contingent on low Japanese interest rate and stable currency value.

UBS’s Solita Marcelli noted that market volatility could remain “elevated” for some time, due to thinner liquidity over the summer, a further unwind of the yen carry trade, uncertainty surrounding Fed policy, and the upcoming presidential election. “While we hope for further gains over the next three weeks, history says to keep our expectations modest,” DataTrek co-founder Nicholas Colas wrote in a note to clients.

 

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