Market Volatility Is Here To Stay

There are three major factors contributing to market volatility.

Volatility is evident in rising interest rates, monetary tightening by the Federal Reserve and trade frictions between the United States and China.

Tensions between the U.S. and China appear to have been alleviated by an announcement by China’s President Xi.  He struck a conciliatory tone and promised to cut import tariffs on U.S. autos.

Nevertheless, Jamie Dimon, the CEO of J.P. Morgan Chase, issued a warning about market volatility, liquidity, and rising interest rates.

Dimon wrote in an annual letter to shareholders released late Wednesday.  Dimon’s worry is that the causes for this volatility, particularly amid growing jitters over the health of the global economy, are still unknown.  He does offer up a few theories, which can be read in his complete 50-page letter here.  In his letter, Dimon pointed to a lack of liquidity in several financial markets.  And he noted “extreme volatility” in U.S. Treasuries, currencies and global bonds.  “These violent market swings are usually an indication of poor liquidity.”

In addition, Dimon said that he believes that the yield on the 10-year U. S. Treasury could reach 4%.

Meanwhile, #bond prices were rattled today by the news that wholesale prices in March showed an increase of 0.3%.  The prevailing expectation was for an increase of 0.1%.

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