SINGAPORE (Feb 19): The market is consistently proving that everybody can be wrong. Global equities got hammered badly in the first few trading days of February, wiping out 2018’s entire year-to-date gain amid soaring volatility and the resulting panic selling. Just a few weeks ago, the market was euphoric as macroeconomic data continued to improve globally, underscoring a strong -global cyclical upswing. The biggest risk does not come from fundamentals; it comes from within — complacency and overlooked volatility.

On Feb 5, the widely used “fear gauge” — the CBOE Volatility Index — surged to an eye-watering level of 49.2, a level not seen in more than six years (see Chart 1). The highest level for VIX was in 2008 during the subprime crisis, when it was around 80. Heightened risk-aversion led to the fiercest market correction seen since the 2011 European financial crisis and the impact could reach far beyond the current damage — confidence can get badly shaken.

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