The recent sharp pullback and volatility in global equity markets is not yet over, according to the chief executive of financial advisory firm Longview Economics.
"The idea that it's all done in one sell-off is, I think, probably a triumph of hope over reality," Chris Watling said.
"You get your vicious first wave sell-off that we had with the high on January 26 in the U.S., then you get your typical wave two relief rally which we had last week when the S&P was up 6 percent, the best weekly performance since 2011, then you tend to get a third wave to either new lows or testing the lows from the first wave of the sell-off."
"There's huge complacency … Everyone's talking about a 'healthy market correction' but generally when you have proper pullbacks people are slightly fearful of the bottom — they're not regarding it as wonderful. So, typically, that 'third wave' is key and I think there's probably some more downside risk over the next few weeks."
Watling is not the only strategist to be warning of more volatility to come. Andrew Sheets, chief cross-asset strategist at Morgan Stanley, said on Monday that the recent correction was just an "appetizer, not the main course."
Source: Bloomberg Pro Terminal
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