As noted by Taleb we are living a White Swan event, not since it is predictable but mainly because we cannot call it a Black Swan event. Which means that is something that would eventually take place with great certainty. The event generated an unprecedented impact on the GDP levels of the world economies, as is possible to see down:
(IMF)
Where is it possible to see how deep the Real GDP Growth reaching unprecedented negative values, of around -6%, deeper than the 2007-08 debt crisis. Having a closer look using the advanced economies, as under, we can see with more detail how the burden is being distributed:
(BBC)
Italy showing the biggest impact followed by France, Germany, and the UK. The IMF considers the present situation worst than the Great Depression 1930s. Now being one of the most important graphics to analyse the next one, where we can see the speed of adaptation of the market to the current situation, which is stunningly fast:
(Seeking Alpha: The Heisenberg)
As we look to this rank of the “Days from peak to Bear Market” the market reaction was faster than:
- 2007 Crisis
- 1930s Crisis
This probably allows us to read it like a real tidal wave that not just transformed the market, the market itself adapts faster than ever, almost giving the perception that it was waiting for it.
Another scenario could be that something was building up, like the continuous leverage promoted by the Central Banks since the 2007 crisis that has kept the volatility artificially suppressed, giving passage for even more leverage. And like SocGen’s Andrew Lapthorne stated: “leverage was built on the premise that nothing bad happens”. In sum, we probably can state that the present situation had:
- Strong impact
- Fastly absorbed by the market
Generating a unique time in terms of risk and opportunities, which equals volatility the biggest friend of a trader that seeks violent movements on the market.
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