Commenting on inflation controlling markets and exerting significant influence on trading behavior, Jeff O’Connor, head of Market Structure for the Americas at Liquidnet, said in an emailed statement: “Over the past week, we have seen wild fluctuations in equities – driven by traders closely analyzing the news cycle, searching for glimmers of positive news. The recent encouraging US CPI data resulted in an explosion of aggressive high conviction trading and drove strong appetite for large block trades, as traders leapt on positive indicators in an otherwise gloomy market – pushing the liquidity in our own pool to the highest level in months.”
“Inflation is in control of markets and is exerting significant influence on trading behavior. The anticipation of the CPI data and other macro data points, coupled with tight trading conditions, means that pent up aggression around announcements is high. It also means that equity markets can turn on a dime – cash levels and volatility are high – pushing trading behavior to all or nothing extremes.”
“With inflation going nowhere any time soon, we can expect to see this trend to continue – driving peak and troughs as traders pick their moments to strike around signs of positive economic news, but keeping their powder dry when the outlook is uncertain.”