Someone Hit the 'Sell Everything' Button?

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Something 'dangerous' is happening beneath the surface of the market selloff

Sam Ro
Managing Editor
Yahoo FinanceFebruary 27, 202

"No asset class appears to be safe amid the current global market rout. And while it goes without saying that people are losing money, the phenomenon may underscore something far more ominous.

"For the last few weeks, while we've had this volatility, you've had stocks zig while bonds zag. So every time stocks went up, bonds tailed off and vice-versa," Academy Securities' Peter Tchir said on Yahoo Finance's The Final Round. "All of a sudden, that behavior changed a little bit into the close yesterday. And making it even more dangerous to me, you saw oil fall off into the close. Commodities were selling off. Even Bitcoin was selling off into the close."

Typically when uncertainty spikes in financial markets, traders and investors will rotate out of risky assets like stocks and into 'safe haven' assets like bonds or perhaps gold. When this happens, risky asset prices go down and safer asset prices go up.

But when market participants are panicking, they begin to cash out of everything. And that can lead to even more panic.

In a note to his clients titled "Did Someone Hit the 'Sell Everything' Button?," Tchir wrote that "While increases in volatility are concerning for market participants, changes in correlations, while more esoteric are far more dangerous. Changes in correlation can affect portfolio level volatility far more dramatically than a simple increase in volatility across asset classes (sounds wonky, but this is important)."

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Something 'dangerous' is happening beneath the surface of the market selloff

Financial asset correlations are breaking down, and that's dangerous.

Yahoo Finance (finance.yahoo.com)