Via the until now bullish Viktor Shvets of Macquarie:
We ask whether a rise in volatilities is inevitable and what might be the consequences for asset classes and public policies.
Investors are currently residing in a surreal world of low volatilities and spreads, ignoring potentially radical shifts in monetary and fiscal policies and unwinding of extraordinary measures of the last decade. Even as CBs are worried about lack of volatility and excessive risk-taking, investors seem convinced that either strength of economic recovery, or return to liquidity and cost of capital supports, will ensure that volatilities are kept under control. Thus, either way, investors seem to expect that spreads would stay low and elevated valuations of various asset classes remain a permanent feature of an investment landscape.
