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Will Rhind, founder and CEO of GraniteShares, a global issuer of Exchange Traded Products (ETPs) with more than $7 billion under management, commenting on the global stock market sell-off, says
(MENAFN- Perceptiona) "Another Black Monday. Global markets are falling heavily this morning sparked by last week's decision by the Bank of Japan (BOJ) to raise interest rates by 0.15% which has had the effect of crashing the infamous yen carry trade.
"The BOJ decision accelerated the appreciation of the yen against the US dollar and other currencies wiping out trillions in levered investments - those who had borrowed in yen and used the proceeds to purchase US stocks and other assets.
"This led to a historic market crash in Japan on Monday and now a global selloff. To put this in context, Japan’s benchmark the Nikkei 225 index recorded its worst-ever daily sell-off on Monday, losing 4,451.28 points from the previous day's closing. This was even worse than the 1987 crash. In the US, calls for a Fed rate cut, even an emergency one, are now getting louder as signs are that the economy is now slowing as a result of rates staying too high for too long.
"Volatility as measured by the VIX index has exploded higher and is now trading at a level last seen in the COVID crash of 2020. What does this all mean?
"Q2 earnings have been a bit of a mixed bag but on the whole have been good, especially for some of the large tech companies. Its too early to say the economy is really slowing down but perhaps the market rout has now given the Fed the cover its needs to start cutting rates aggressively to stabilize the market. A lot of the volatility today is a natural function of the yen carry trade unwinding and may present a buying opportunity for stocks, especially the highest quality tech names."
"The BOJ decision accelerated the appreciation of the yen against the US dollar and other currencies wiping out trillions in levered investments - those who had borrowed in yen and used the proceeds to purchase US stocks and other assets.
"This led to a historic market crash in Japan on Monday and now a global selloff. To put this in context, Japan’s benchmark the Nikkei 225 index recorded its worst-ever daily sell-off on Monday, losing 4,451.28 points from the previous day's closing. This was even worse than the 1987 crash. In the US, calls for a Fed rate cut, even an emergency one, are now getting louder as signs are that the economy is now slowing as a result of rates staying too high for too long.
"Volatility as measured by the VIX index has exploded higher and is now trading at a level last seen in the COVID crash of 2020. What does this all mean?
"Q2 earnings have been a bit of a mixed bag but on the whole have been good, especially for some of the large tech companies. Its too early to say the economy is really slowing down but perhaps the market rout has now given the Fed the cover its needs to start cutting rates aggressively to stabilize the market. A lot of the volatility today is a natural function of the yen carry trade unwinding and may present a buying opportunity for stocks, especially the highest quality tech names."
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