17.10.25 - Global market shake-up
Markets are shaken by renewed fears of a brewing credit crisis. What started with the bankruptcies of a two auto-related companies in the US has now rippled through the global financial system.
Memories of the 2023 banking turmoil, marked by the collapse of regional lenders and the rescue of Credit Suisse, are quickly revived.
While the large global banks appear well capitalized and stress tests remain reassuring, markets are increasingly questioning whether these isolated “one-offs” are truly isolated.
In Asia and Europe, shares mirrored the US sell-off. Safe-haven assets like the Swiss franc and gold gained. Volatility spiked, with the VIX moving above the 20-level, signaling a rise in market nervousness.
Markets: global markets in the red
Global equities sell-off
Gold with new all-time high in direction to USD 4’400/oz
Bond yields broadly lower with credit spreads rising - the US 10-year Treasury yield at 3.95%, falling first time below 4% since September 2024
US dollar falls
Cryptos see heavy losses
Volatility sees a spike
My View: The key question: are these small dominoes heavy enough to topple the next one? For now, major banks remain solid, but confidence can shift quickly if headlines multiply.
Financial stress rarely emerges overnight. It builds quietly until one event tips the balance. While current incidents still appear contained, they serve as a reminder of how fragile parts of the credit system remain after years of cheap money.
From an investor’s and market’s perspective, the bigger risk in the short-term may not lie in the banks themselves but in forced liquidations. Highly leveraged funds or investors running “all-in” strategies might now be forced to unwind positions, amplifying volatility across asset classes.
In the ETFMandate portfolio I am “short” in US and European banks.
The positions got established this year during the months March to June. Obviously they do not have a positive performance, but are now kicking in and could pay-off should the dynamics emerge.
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