Stock and bond markets have seen steep declines in 2022
Securities and Exchange Commission Chairman Gary Gensler spoke Friday on the growing volatility in U.S. stock and bond markets, reassuring market participants that a primary focus of the agency is maintaining financial stability during times of stress.
“When it comes to markets, the test of a gold standard is that such markets can function in orderly times and in stress times,” Gensler said in opening remarks at the SEC’s annual conference on financial market regulation Friday. “Such resiliency helps ensure that shock waves don’t propagate into the real economy.”
U.S. fixed income and equity markets have seen steep declines in recent weeks, culminating in a Thursday sell off that saw the the S&P 500 SPX, -0.57% fall 3.6% and the Nasdaq COMP, -1.40% slump by 5%, its worst daily showing since the height of the COVID crisis in 2020. Year-to-date, the S&P has lost more than 13% while the Nasdaq is down 21%.
Gensler attributed this volatility in part to “uncertain geopolitical events” as well as rising inflation that has forced central banks around the globe to raise interest rates. “In such times of…economic uncertainty, there’s a transition and we’re reminded of the importance of financial resiliency,” he said. “I don’t think we can take it for granted.”
The regulator pointed to stresses in money market funds and municipal and taxable bond funds in the wake of the 2020 COVID market crisis as evidence that regulators must remain vigilant to the threat of financial contagion.
Gensler added that the SEC is working on new rules around cybersecurity, asset management and financial market infrastructure that will promote financial market stability.
“We can continue to navigate geopolitical challenges,” he said. “We must always think about ways to enhance efficiency, resiliency and transparency in our markets.”