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Sevens Report Research sees similarities to 06/07, market susceptible to bouts of sudden volatility

Published 2023/12/22, 16:56
© Reuters.

Sevens Report Research said in its morning note on Friday that they see "five measurable similarities to 2006/2007."

The firm explained that answering the question regarding what lies ahead for the stock market and bond market in 2024 is especially difficult right now, considering "the slew of mixed signals we are facing as we approach the end of 2023."

"A few of those notable signals include 1) The deepest yield curve inversion since 1981, 2) The highest real interest rates since 2008, 3) Unexpectedly resilient economic data with Real GDP pushing 5% in Q3, 4) Stocks testing all-time highs, and 5) A historically complacent VIX reading," they stated.

"But these are not unprecedented dynamics, and frankly, they're reminiscent of the time period spanning 2006 and 2007," said the firm.

However, the research company confirmed they are not calling for a market collapse or a second round of the Global Financial Crisis. Even so, they noted similarities, including the yield curve being in a prolonged inversion, real interest rates at cycle highs, the economy booming, the S&P 500 testing highs, and the VIX near all-time lows.

"As long as the market's fundamental consensus is uncertain and lacks conviction, which remains the case right now, this market will be susceptible to pullbacks and bouts of sudden volatility," claims the firm.

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