Volatility Driving Traders Away from Financial Markets

According to a recent Bloomberg article, the increased volatility in stocks, currencies and bonds is driving traders away from financial markets. While U.S. equities have recently rebounded, volume in the S&P 500 is down. Regarding currencies, speculative bets have dropped to the lowest levels in two years and average daily trading of U.S. Treasuries is nearing a seven-year low. The state of the industry has been described by some bankers as one of “paralyzing volatility” in which clients are being chased away, causing industry-wide trading revenue to plunge to its lowest level since 2009. While a rise in volatility usually leads to higher trading activity, according to the article, “violent swings across assets have whipsawed just about everyone as concern deepens over global growth and the effectiveness of negative interest rates and quantitative easing.” As a result, certain banks are saying they are focusing their business on wealth management rather than trading or making markets.

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