Wednesday, March 10, 2010

Fear subsides, prices rise (17)

Yet another update to this chart which shows how equity prices move virtually in lockstep with the Vix index. The selloff in Jan-Feb was driven by increased fears that the economy was faltering. Now confidence has come back and prices are within inches of regaining the Jan highs.

This is also a reminder that one of the major factors behind the recession of 2008-9 was a lack of confidence. With confidence returning (slowly but surely), demand is returning, economies are expanding, and asset prices are within shouting distance of their previous highs. This process is not yet over.

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