JOHCM's Leyland: The 'Looney Tunes' nature of global stockmarkets

Fuelled by cheap QE money

In the old Looney Tunes cartoon, Wile E Coyote would often be pictured frantically clawing at thin air having careered blindly over the cliff edge in pursuit of the elusive Road Runner.

That is roughly how global equity markets looked like to us during 2017 and the middle part of 2018. With the rocket fuel of cheap money provided by QE and rock-bottom interest rates having run out, gung-ho price-insensitive momentum investors are finally realising that the ground beneath them has disappeared. It is clear we are experiencing a structural rise in financial market volatility. We see this as a natural consequence of the pressures that have been building for a number of years, including elevated valuations, crowded trades and a chase for yield, resulting in deteriorating len...