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BlackRock Warns “High Valuations & Low Volatility Are A Lethal Mix”

zerohedge.com / by Tyler Durden / 12/10/2013 21:10 -0500

BlackRock said there is a 20% risk that world events could go badly wrong, either because the eurozone acts too late to head off deflation or because of a chain reaction as the Fed starts to wind down stimulus in earnest. As The Telegraph notes,BlackRock’s risk indicator  is almost as high as it was just before the dotcom bust. “The ratio of the two is the key. High valuations combined with low volatility can make for a lethal mix. This market gauge sounded the alarm well before the Great Financial Crisis.” Furthermore, the largest asset manager in the world warns, “troubling trends of growing inequality and weak wage growth, bring into question the sustainability of profit margins.” What is good for investors is corrosive for societies, hardly tenable equilibrium.

Via The Telegraph,

BlackRock, the world’s biggest investor, has warned that central banks are poised to tighten monetary policy in the Anglo-Saxon countries and China, advising clients to be ready to pull out of global stock markets at any sign of serious trouble.

The group said in its 2014 Investment Outlook that investors have “jumped on the momentum train, effectively betting yesterday’s strategy will win again tomorrow”, but vanishing liquidity could leave them trapped if the mood changes. “Beware of traffic jams: easy to get into, hard to get out of,” it said.

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