By Martin Atkin
Trump. Brexit. There were plenty of big stories last year. But the one that may matter most for your portfolio in 2017 - and how you manage risk - is how markets responded to these surprises.
How to sum up that response? Maybe this: it took markets three months to process Japan's negative interest rate policy, three weeks to get over the Brexit shock, and about three hours to digest Donald Trump's election.
In each case, global stock markets and other risk assets initially sold off, only to recover swiftly - a trading pattern known as a V-shaped recovery for how the price move appears on a trading screen.
This kind of highly correlated trading, with risk assets moving in one direction and safety assets (such as government bonds) in another, isn't new. As any investor active in recent years knows, risk-on/risk-off… Read More …