What Are Market Jitters?

"Market jitters" is a colloquial term for an elevated state of anxiety and perceived uncertainty about the economy or a specific asset market.

Market jitters can be a sign that the stock market is overdue for a pullback or correction. This can lead to a 澳洲幸运5官方开奖结果体彩网:repricing of risk oꦰr further degenerate into a significant economic downturn.

Understanding Market Jitters

Market jitters is a phrase associated with the turning point at the peak of a 澳洲幸运5官方开奖结果体彩网:bull market or a stock market rally. This is usually when a negative economic shock, unexpectedly bad economic data, or poor corporate earnings reports increase market 澳洲幸运5官方开奖结果体彩网:volatility. These events signal that there may be trouble in the financial markets.ও

When markets experience jitters it can be a sign they are overdue for a correction. Investors may reassess their portfolios and either consider shifts in 澳洲幸运5官方开奖结果体彩网:tactical asset allocation, or rebalancing to bring their portfolios back to their desired 澳洲幸运5官方开奖结果体彩网:strategic asset allocation. As risk is repriced, market jitters can lead to big flow🃏s into and out of different global asset classes.

As the saying goes, markets hate uncertainty. Market jitters often involve not only risk (known or estimable factors that can be priced in) but true uncertainty (unknown factors whose risk or probability cannot be reliably estimated). 澳洲幸运5官方开奖结果体彩网:Efficient markets may be able to handle risk well and adjust well to changing risk across various asset classes, but uncertainty is more difficult or impossibl♕e to accurately price. 

Although uncertainty by its very nature cannot be factored into prices, economists have devised ways to e▨stimate the general perception of uncertainty in an economy. They use measures of asset price volatility, the dispersion of forecasts of economic performance among major forecasters, and the frequency of media mentions of terms related to uncertainty. Time periods when these measures are elevated can be considered episodes of market jitters. 

Market Psychology

Psychological factors often end up playing a role during periods of heightened uncertainty, which can lead to high volatility, dramatic price swings, and market instability. 澳洲幸运5官方开奖结果体彩网:Keynesian economics refers to these types of factors as "澳洲幸运5官方开奖结果体彩网:animal spirits" due to t꧒heir perceived irrationality. In a worst-case scenario, a market may experience a setback purely as a resultꦓ of market jitters, if the sentiment devolves into general pessimism.  

During periods of market jitters, investments and trading strategies that are resilient to or benefit from market volatility may be advantageous. However, they may also fail dramatically if the investors guess wrong. Market jitters also tend to induce flights to safety in investments, where investors try to protect themselv🔜es from r꧋isk and uncertainty by moving into lower risk, lower return asset classes. 

Example of Market Jitters

In the first half of 2018, the U.S. stock market experienced market jitters, because of fears that the Federal Reserve's interest rate hikes and quantitative tightening might quash the economic recovery, and trigger a sell-off in the bond market and the stock market.

Adding to their fears was the flattening of the yield curve and the sudden widening in the 澳洲幸运5官方开奖结果体彩网:LIBOR-OIS spread, which is a measure of stress in the banking sector. The result of these market jitters was a big spike in the VIX, the 澳洲幸运5官方开奖结果体彩网:Cboe Volatility Index for the S&P 500, otherwise known as the "fear index."