Markets haven’t had a great start to 2016.
The investor concerns of 2015 — an oversupply of oil, slowing Chinese growth and rocketing emerging market debt — are still with us and show no sign of abating.
Oil is hovering at $30, down more than 70% from highs in 2014.
Meanwhile, the high-yield bond market has been hit by investor outflows and rising US interest rates.
Credit Suisse analyst Helen Haworth looked at investor appetite for risk and found that it fit the profile of a full-blown panic.
The team looked at things such as global growth rates, economic policies, and asset valuation to come to that conclusion.
The Credit Suisse chart shows where we are today, compared with past panics:
This can be very good news for investors who have the stomach for some risk, for a short time at least. Where there is panic, euphoria can’t be very far away.
It’s like that old Warren Buffet line: “Be fearful when others are greedy and be greedy when others are fearful.”
Here’s Credit Suisse (emphasis ours):
Our base case based on the view of our economists for a controlled slowdown remains that developments in China are likely to lead to periodic bouts of global market volatility that should provide attractive market opportunities.
But you need a healthy appetite for risk to take advantage of the swings:
But we are wary. The lack of transparency makes the situation in China very hard to read, resulting in extremes of opinion, and risk sentiment swings can be violent, exacerbated by the reduction in liquidity in some markets.