{"id":48397,"date":"2019-09-12T05:44:44","date_gmt":"2019-09-12T10:44:44","guid":{"rendered":"https:\/\/olduvai.ca\/?p=48397"},"modified":"2019-09-12T05:44:46","modified_gmt":"2019-09-12T10:44:46","slug":"the-risk-of-a-flash-crash-is-rising","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=48397","title":{"rendered":"The Risk of a Flash Crash is Rising"},"content":{"rendered":"\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/media.licdn.com\/dms\/image\/C4E12AQF7kq4pCfyoOw\/article-cover_image-shrink_600_2000\/0?e=1573689600&amp;v=beta&amp;t=Mk3zbe-YG-WtAestG8edj_wuJxs7WDxpzms5GM7X_kI\" alt=\"The Risk of a Flash Crash is Rising\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.linkedin.com\/content-guest\/article\/risk-flash-crash-rising-oliver-renick\">The Risk of a Flash Crash is Rising<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Disclaimer: first of all, calm down. I&#8217;m not predicting anything. In fact mostly I&#8217;m just tying threads together between a bunch of market risks that have been highlighted by many for some time. Early perhaps they were, but not necessarily wrong. As investors become such increasingly one-sided in their macro outlook, these risks become more pronounced.&nbsp;<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As stocks rallied last week and the U.S.-China trade itinerary got a nice-sounding update, U.S. economic data continued to beat expectations and is now surprising estimates at a positive rate. One graphic I saw on Twitter caught my eye: SocGen&#8217;s take on the biggest event risks, in which they describe the probability and potential scope of a &#8220;sharp market repricing&#8221; as being low and small.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/media.licdn.com\/dms\/image\/C4E12AQHAI2CK7ylgvA\/article-inline_image-shrink_1000_1488\/0?e=1573689600&amp;v=beta&amp;t=h_DPWYmuR1vujWmiiP6SgEYnLiNZQKgSoOm2LeUVHUM\" alt=\"No alt text provided for this image\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s consistent with what I see elsewhere. There is a view more consensus right now than any I&#8217;ve ever seen: the world economy is slowing and the Fed and other central banks will continue cutting rates. Everyone agrees on the basics,&nbsp;<a href=\"https:\/\/www.linkedin.com\/pulse\/theres-arms-race-happening-markets-oliver-renick\/\" target=\"_blank\" rel=\"noreferrer noopener\">they just have different views on how to play it<\/a>. Among bulls, there is also a strong&nbsp;<a href=\"https:\/\/www.ft.com\/content\/efc53874-cd02-3dda-9529-b6ed87762805\" target=\"_blank\" rel=\"noreferrer noopener\">consensus<\/a>&nbsp;view that relentless bond-buying momentum is innocuous and central banks will provide an adequate safety net for whatever risks may be associated with the forces behind this market action. Moreover, the general line of thinking I hear is that, even if there is a big bond selloff, stocks will be immune from blowback.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I disagree. A sharp market repricing should be the fattest swan on that diagram.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The greatest risk to investors, the economy, and the tenuous state of geopolitics, is the price of the S&amp;P 500. That\u00a0<strong>does not mean<\/strong>\u00a0it is the\u00a0<em>most likely<\/em>\u00a0risk &#8212; what it means is that the ripple effect of a sizable selloff in stocks right now is monstrous. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Risk of a Flash Crash is Rising Disclaimer: first of all, calm down. I&#8217;m not predicting anything. In fact mostly I&#8217;m just tying threads together between a bunch of market risks that have been highlighted by many for some time. Early perhaps they were, but not necessarily wrong. As investors become such increasingly one-sided [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[4715,27145,690,3650],"class_list":["post-48397","post","type-post","status-publish","format-standard","hentry","category-economics","tag-flash-crash","tag-oliver-renick","tag-risk","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48397","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48397"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48397\/revisions"}],"predecessor-version":[{"id":48398,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48397\/revisions\/48398"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48397"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48397"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48397"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}