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Early signs of market stabilization?

Posted on 27-Sep-2011 by raisepartner

After a large bump mid-August, the RP Quant Systemic Risk Index continued to rise at a slower pace early September and reached its highest value mid-September (243). However, the index has started to slowly decrease over the past week (230 on September 23rd).

The examination of the correlation map we introduced last week shows that the “red wave” has stopped its progression: after stabilizing at a very high level (>84%) for a few weeks, correlations between the industrial sectors seem to slowly decrease but remain larger than 82%.

But caution still applies as the systemic risk level remains very high. Last week, president of the AMF (Autorité des marchés financiers) Jean-Pierre Jouyet mentioned a « very worrying situation on the financial markets » and a « risk of systemic crisis » that might lead to a worldwide recession (source: REUTERS). “The situation is not better than it was in 2008”, he said. Indeed, the RP Quant Systemic Risk Index reached a value of 210 in October 2008, which is lower than today’s level (230).

For more information and analysis, visit the new section of our website dedicated to the RP Quant Systemic Risk Index.