A little over a month ago, markets were reeling from a series of mini-crises.
Oil plunged below $30 a barrel, Chinese stock markets collapsed and there were fears for European banks after a terrible round of results.
Analysts at Deutsche Bank put together a few charts to show how strongly markets have bounced back.
For a start, volatility — measured by the so-called Fear Index — is way down from highs at the start of 2016.
Here’s the chart:
Oil has jumped 40% from its lows:
And stock markets have fought back to recover some of their losses:
Better economic data from the US and the European Union, coupled with central banks’ willingness to pull out the monetary stops whenever there is financial volatility, has helped coax investors back to the markets.
But this doesn’t mean we’re out of the woods yet. Sentiment is fragile, and any blow to confidence could see markets sell off again.
Here’s Deutsche Bank (emphasis ours):
The risk rally has further to go, but risk sentiment will remain vulnerable to negative developments on a number of fronts.
A hawkish turn by the Fed could set off a re-pricing of global rates and reverse the recent weakening of the dollar, reintroducing concerns about China FX depreciation, lower commodity prices, and credit concerns in the energy sector. An escalation of political risk in Europe could also spark a new sell-off.
A more sustainable rally will require conclusive evidence that these concerns have been resolved.