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London - Even the wildest markets nearly always draw opportunists looking for profitable ways to play them. But recent volatility has hit such a level that the strongest-nerved are thinking twice.
This week saw enormous swings across global financial indices as investors took fright at the potential impact of slowing growth and inflation, particularly in Europe, just as the United States ends its huge monetary stimulus programme.
Some of the moves were staggering: The 10-year US Treasury yield - the benchmark reference point for the cost of money around the world - plunged as low as 1.86%, while the Greek 10-year yield soared above 9% and Venezuela's benchmark yield hit nearly 20%. Oil fell below $80 a barrel for the first time in more than four years.
The consensus among major investment banks and fund managers is that markets overshot and future trends will be calmer.
But for many the question remains: was the recent upheaval a chance to reset, or are conditions simply too panicky to risk?
"We better fasten our seatbelts," said Giordano Lombardo, group chief investment officer at Pioneer Investments.
"The current phase of volatility is going to last until we see a decisive change in the policy mix that... has proved to be ineffective to lift the rate of growth of the global economy."
Both Wall Street and European bourses saw their highest levels of turbulence in three years and amid the noise, equity markets came in for a particularly bad pummelling.
The $5.7bn that fled European equity funds this week was the biggest outflow on record, said Bank of America Merrill Lynch (BAML), adding that global stocks have now shed $4.85trn of their value since mid-September.
That puts valuations now much too low, others estimate.
UBS says corporate earnings for 2015 and beyond would have to be downgraded by huge amounts in order to reflect recent market moves - 45% in German earnings, 40% in Europe excluding the UK, and 29% in the United States.
"We believe the scale of the adjustment is not reasonable. This, again, leads us to think that the market is over-reacting," the Swiss bank said in a note to clients on Friday.
Equity strategists at Barclays, meanwhile, reckon European stocks are their cheapest in 15 years when compared to credit market yields.
The water's lovely..
Many don't have the luxury of choice, however. Among those wading back into the markets from Monday will be fund managers trying to keep anxious clients with them and make up recent losses in what little is left of the investment year.
The average US stock mutual fund manager lost 2.92% in September, Lipper data for that month showed, compared with a 0.4 percent drop in hedge funds' performance gauge.
And that was before the most recent turmoil: Data for the week ended October 15 showed that investors in US-based funds pulled a record $1.3bn out of European equity funds.
"Before this correction, fund managers were looking at their gains and wondering whether to book profits," said Yannick Naud, portfolio manager at Sturgeon Capital.
"Now we don't have that luxury. Investors will want to get back in and will be looking to buy liquidity, benchmark indexes, basically big and liquid securities. What you won't see is everyone buying anything that looks cheap."
The shakeout in bond and credit markets was also dramatic, prompted by the fact that a huge chunk of the investment community - according to anecdotal evidence and positioning data - had bet on US Treasuries prices falling and yields rising.
Painful as this week might have been, the result now is a better balanced marketplace, strategists say.
UBS pointed out that the outflows from high yield bond markets in the third quarter reversed nearly half of all the cumulative inflows since 2009, suggesting that the market is less susceptible to extreme volatility.
"The skewed short positioning we saw nearly two months ago has given way to a more balanced picture," Citi's rates strategists said in a note on Friday.
