The FTSE 100 slid on the first day of trading in 2015. Here are 10 warning signs that the markets may drop further.
Vix fear gauge
For five years, investor fear of risk has been drugged into somnolence by repeated injections of quantitative easing. The lack of fear has led to a world where price and risk have become estranged. As credit conditions are tightened in the US and China, the law of unintended consequences will hold sway in 2015 as investors wake up. The Vix, the so-called “fear index” that measures volatility, spiked to 18.4 on Friday, above the average of 14.5 recorded last year.
Rising US Treasury yields
With the Federal Reserve poised to raise interest rates for the first time in almost a decade, and the latest QE3 bond-buying programme ending in October last year, credit markets are expecting a poor year for US Treasuries. The yield on two-year US Treasuries has more than doubled from 0.31pc to 0.74pc since October.