Stocks Face Slow Selloff as Rates Rise and Stimulus Wanes, Creating Volatile Conditions and Testing Post-COVID Gains
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Market selloff is slow and frustrating as rising rates should cause a plunge but government stimulus tempers the fall. Small caps have broken support levels.
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Financial structures formed during low rates are being tested, evidenced by declines in financial stocks and regional banks.
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Selloff is like "water torture" with negative gamma causing rips and dips. Stocks oscillating around support levels before breaking down.
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Stocks sliding back to pre-COVID levels, suggesting post-COVID gains were a "sugar high" fueled by stimulus.
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Hard to hedge in this environment. Sentiment could spur year-end rally in negative gamma conditions. Volatility works both ways.