|Russ Koesterich, CFA – BlackRock
No, Washington is Not to Blame for the Volatility
Summary: Volatility can be attributed to culprits other than Washington. High yield spreads are one of the best coincident indicators of market volatility. When spreads are higher, volatility tends to follow and high yield spreads have been widening since February. Furthermore, financial conditions have an inevitable effect on equities, and the US Libor OIS spread that measures credit conditions has doubled in recent months. Lastly, the economy is strong, but simply not as strong as many had hoped and central banks in both the US and Europe will not be easing policy anytime soon in their attempts to normalize monetary conditions.