Deutsche Bank: An 8-10% Selloff 'Looms' As Volatility Returns to U.S. Stocks

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Volatility awoke from its summer slumber last week, with the Chicago Board Options Exchange's VIX index spiking on Friday to close above 20 for the first time since the sessions following the Brexit vote.
The index, sometimes known as Wall Street's fear gauge, might have further to go.
Deutsche Bank AG Chief U.S. Equity Strategist David Bianco sees five reasons why autumn will be characterized by a move to a higher volatility regime:


1: Profit expectations for the year ahead will be cut amid a disappointing third-quarter earnings season;

2:The Federal Reserve will stay on hold in September and offer little hints as to when its next move might be, fostering uncertainty;

3:Uncertainty that will only be increased by the U.S. elections;

4:Capital spending will remain in the doldrums; and

5:Stock valuations are only justified by low bond yields, which aren't as low as they used to be after last week's price action.
The strategist cautions that on volatility, as is the case with any other asset class, past performance is no guarantee of future results. Bianco said an 8 to 10 percent decline in the S&P 500 index "looms" in light of these factors that should lead to more turbulent markets.

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