Geopolitics
More than 100 diplomats have now been expelled from the UK, Europe, and the United States. Tensions between Russia and the West have been an underlying theme in the news but so far have not influenced the financial markets too much.
It will be interesting to see how the markets will be impacted if and when Moscow retaliates.
Also in geopolitics, it seems that the supreme leader of North Korea may be visiting Beijing at the moment. This will probably pass quietly but I thought it worth noting as it could influence markets later on.
Traditional Markets
As we mentioned above, volatility is strong right now but not too strong. Here we can see the VIX volatility index since it began in 1990.
The 2008 crisis can be seen clearly with the spike as high as 80 points. Though we’re now seeing sustained levels greater than we have in the last five years, just take a look at the period from 1997 to 2003 (red circle), where volatility remained higher than it is now for most of that period.
This type of volatility is not conducive to passive index investing or to a simple “buy the dip” strategy. It does require investors to be nimble and adjust to current conditions, if not on a daily basis than at least make adjustments once a week.
The good news is, this type of volatility creates massive opportunity. When things are moving faster, it’s easier to make short-term trades that yield good results. However, this does require retraining ourselves to adjust to the situation.
Crypto-Support
For cryptotraders, the dynamic is changing as well. The buy the dip and hold on strategy (AKA #HODL) has become somewhat of a cliche in the crypto community.
Just like in stocks, the prices will probably recover eventually, as they did from the market crashes in 2000 and 2008, but who wants to hold on that long?
The good news is that crypto moves faster than stocks and the cycles are much shorter. Yes, this market itself is a lot more nimble.
