Mo’ momentum markets

UBS

Jason Draho

Research

8 Pages

This UBS piece explores why market volatility has intensified despite stable index levels, attributing the behavior to a feedback loop of monetary policy, investor herding, macro uncertainty, and index-linked trading. It argues these dynamics are structural, not temporary, and will continue to shape investment conditions going forward.

Key Takeaways

Volatility is systemic: Rapid rallies and reversals stem from structural market changes, not random noise
Momentum trades dominate: Fed policy, low conviction macro views, and passive/index strategies reinforce unstable price swings
Macro inefficiency rises: Index prices often disconnect from fundamentals, creating opportunity for active asset allocators
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