The Tell: Why is market volatility so low when uncertainty is so high?

Just like New York Federal Reserve President William Dudley, investors might be looking at the relationship between uncertainty and market volatility all wrong, one analyst says.

Volatility—and expectations for future volatility—in the stock market and across other assets remains subdued even as investors wrestle with a high degree of uncertainty about everything from the Federal Reserve to the Trump administration’s fiscal plans to a series of elections that could further undo Europe’s postwar political order.

Dudley last month admitted he was perplexed, saying, “You would think if uncertainty was high, you’d have a bit more volatility.”.

But that’s not how it works, wrote Steve Barrow, currency and fixed-income analyst at Standard Bank, in a Monday note.

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