Analysts working at the Bank of America (NYSE: BAC) Merrill Lynch warned that investors are ignoring one vital aspect of the ever-rising financial markets: risk. Nikolay Angeloff, an equity-linked analyst working at the bank, circulated a note stating that the market behavior is such that there is zero possibility of a shock derailing the market. He noted that the US market enjoyed a total of 334 days sans a pullback of five percent or more. This makes it the fourth longest run since 1928. He added that if the markets continue at this scorching pace, then the October of 2017 will be the minimum volatile of Octobers in financial history. The statistic will also make October 2017 the third least volatile period ever.
The Nasdaq Composite, S&P 500, and Dow Jones Industrial Average (DJIA) are up by almost 14 percent until October 2017. The market rose steadily the whole year, with risks almost non-existent in 2017.The VIX or CBOE volatility index has been trading at one of its lowest levels in history. It has closed under 10 for about five consecutive weeks. Angeloff said that the pricing of the markets provides a minimal potential for shock. The market is clearly disassociated with the increased global political and geopolitical risk. This is more true for the North Korean threats against the US. The Deputy Ambassador of North Korea said that the situation inside Korean Peninsula is now such that there is a possibility of a nuclear war in the region.
In Europe, Mariano Rajoy, the Prime Minister of Spain, moved the courts of his country so that the breakaway Catalonia region remains a part of Spain. His petition was to snip away the parliamentary powers given to Catalonia. Spain is now in the midst a geopolitical crisis.
Some suggests options
Despite all the troubles in the world, American stocks continue to move up. There is also a rise in the hope that the GOP will do something about the legislation concerning tax reform. Gina Sanchez, the Chantico Global CEO, told that although she does not know when the markets will fall, passengers must leave the gravy train before this whole thing implodes apart. Sanchez said that her only concession to protect her company is to diversify all risk. This means that the stocks which underlie the assets carry a greater amount of risk. Experts suggest that the company should start offering options.