JPMORGAN: The defining feature of the last stock-market meltdown was a symptom of a bigger shift that could trigger crashes for years to come

almost back at all-time highs, the vicious sell-off that occurred in December is fading further into the rearview mirror.analysis of the 20% correction and subsequent recovery demonstrated that low market liquidity was a major cause of the market's moves — a dynamic the firm says will persist going forward.

"All of our paradigm shifts became apparent during the December correction and the sharp V-shaped rally back in January,"She added:"The liquidity shock occurred with a 20% US equity market correction in the fourth quarter, populist sentiment increased after the November midterm elections, the Fed pivoted by January and the US/China came to understand that they need some sort of détente, with a trade agreement potentially announced later this month.

They include the rise of systematic trading strategies that are programmed to react to certain market environments without the intervention of human market makers. Another paradigm-shifting development has been the $3 trillion transfer of assets from active managers to passive instruments since the Great Recession. Notably, there are fewer value investors to hunt for bargains during market crashes, and this hampers the ability of the market to recover from big drawdowns, Kolanovic said.Even though US Treasuries form the largest bond market in the world, there's evidence under the surface that liquidity is constrained.

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