Nerves of steel: Hyper-sensitive markets could falter unless they face headwinds head on

Pro-risk positioning makes sense in recovery

Last year’s rally in risk asset classes has carried over into 2021, with global stocks and credits at all-time highs. Alongside rising markets, some analysts have now begun to question whether we are in bubble territory. We think that's premature.

However, strong market performance does come at a cost to investors. Expected returns across asset classes are now even more supressed and, because of higher valuations, the market is set to become hyper-sensitive to the news cycle. During the second half of 2020, investors fretted that while risk markets were enjoying a fast rally back from the March lows, this was at odds with the stop-start recovery in the real economy. Anxiety about the supposed stock market-macro disconnect has now boiled-over into worries about a bubble. CIFC's Horowitz: Volatility is nothing new in bond markets...