While Draghi shook things up in late June, it appears to be Janet Yellen's flip-flop that has sparked the latest regime shift in global capital markets.
Since then, traders' expectations for foreign exchange uncertainty has surged, while the outlook for equity, rate, and oil uncertainty has tumbled.
This has left the market now seeing equities as safer than currencies…
When are equities safer than currencies? As Bloomberg notes – almost never, at least until now.
The one-month implied volatility of the S&P 500 Index is more than a full percentage point below Deutsche Bank’s measure of G-7 currency volatility over the same period, a rare event caused by the combination of a falling dollar and rising U.S. equities. It appears that investors have decided that low-yielding currency returns are riskier than equities, inverting the typical risk/reward relationship.
via http://ift.tt/2uhZku1 Tyler Durden