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Market volatility to rise significantly
July 17, 2024
A simple analysis
The VIX volatility index is too low given real political, economic & valuation risks. Volatility should rise significantly, hurting stocks.
Political risk is high
Given the US assassination attempt at the weekend, political risk looks much higher there than the low VIX index suggests. Political events in European elections with less market friendly wins in the UK & France elections raise political risk too.
Economic risk is high
Economic risk is much higher than the market volatility would suggest. Most everywhere, consumer confidence & manufacturing PMI indexes are lower than they were at the end of 2019 (US consumer convince is only 66 now vs 72 in April 2020). Meanwhile, stock markets are much higher than they were then.
Valuation risk is high too
Valuation risk is also higher. After recent gains from the excitement over AI, AAPL shares are valued as if the company cashflow to assets profitability is 45% when it is in reality 35%. Apple usually has a market valuation close to reality, now it’s 30% over valued.
July 17, 2024
A simple analysis
The VIX volatility index is too low given real political, economic & valuation risks. Volatility should rise significantly, hurting stocks.
Political risk is high
Given the US assassination attempt at the weekend, political risk looks much higher there than the low VIX index suggests. Political events in European elections with less market friendly wins in the UK & France elections raise political risk too.
Economic risk is high
Economic risk is much higher than the market volatility would suggest. Most everywhere, consumer confidence & manufacturing PMI indexes are lower than they were at the end of 2019 (US consumer convince is only 66 now vs 72 in April 2020). Meanwhile, stock markets are much higher than they were then.
Valuation risk is high too
Valuation risk is also higher. After recent gains from the excitement over AI, AAPL shares are valued as if the company cashflow to assets profitability is 45% when it is in reality 35%. Apple usually has a market valuation close to reality, now it’s 30% over valued.
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