“Market’s Stress Cracks—Nearing a Breaking Point?

The financial markets are often compared to a large marble structure. Seemingly rigid and inert, the constant oscillation of the markets appear to remain unchanged – only shifted by a few degrees. But, like a marble structure, the markets are full of tiny cracks and fractures, even if the structure appears to be holding up. The term ‘market stress fractures’ has recently become a buzzword among stock investors and financial analysts. It may appear to just be a buzzword, but market stress fractures can have very tangible effects on the markets. Market stress fractures are the small, imperceptible shifts in the markets which are almost impossible to detect through traditional market analysis methods. They are gradually accumulating over time, like tiny fissures in a marble structure, which eventually cause the collapse of otherwise seemingly solid structures. Although it is impossible to predict when a catastrophic event may occur due to market stress fractures, it is clear that the cracks are forming and investors should take note. Market stress fractures are most often seen when major market players are making a large number of trades within a short period of time. These players have the ability to cause an otherwise stable market to become volatile, as they are making numerous trades which often involve significant amounts of money. If there is too much market volatility, it could cause a stress fracture, and any further trades done by the major market players could cause the markets to become even more unstable and brittle. It’s important to take heed of the signs of market stress fractures as they accumulate. Although there may not be an imminent collapse yet, the signs are there, and the markets could be more vulnerable than usual due to the accumulation of stress fractures. As always, the best advice is to remain vigilant and to limit risk as much as possible.