Financial fragility’ rising in markets – Goldman Sachs

In its latest client note, the US investment bank, Goldman Sachs, warned of growing ‘financial fragility’, as reflected by a spike in the CBOE Volatility Index.

Key Quotes:

Big swings in prices caused by breakdowns in markets themselves.

As opposed to changes in fundamentals.

There's reason to be concerned about liquidity drying up during periods when markets are distressed.

Charles Himmelberg, Goldman's co-chief markets economist, noted: "Future liquidity disruptions may amplify price declines when the current cycle turns. Trading liquidity may be worse than it looks because the trading volume in many major markets is increasingly dominated by more speed and less capital."