Blog: I See Market Risk Arising, But trouble's not on the way, yet.
Downside risks are building, but not yet critical.
According to the Market State Uncertainty Indicator (MUSI), highly uncertain states result when the number of fundamental risks increase and reach a critical mass. One type of risk by itself, even equity risk, does not usually result in a significant bear market. But once a number of risks are high, when one goes off, they all go off causing a risk cascade.
We're not there yet. But market risks are arising. As I reported in the recent flash report MUSI has shifted up a notch from Resilient, where downside risk is low and upside risk is high, to Transition, where upside and downside risks are balanced.
In this post we'll discuss what's changed, and what hasn't.
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