“Future liquidity disruptions may amplify price declines when the current cycle turns,” wrote Charles Himmelberg, Goldman’s co-chief markets economist. “Trading liquidity may be worse than it looks because trading volume in many major markets is increasingly dominated by more speed and less capital.”
The warning on fragility came days after the bank said Friday that investors need to get used to lackluster returns as volatility picks up and stocks and bonds move more in tandem with each other. The selloff in U.S. technology stocks Monday sent the VIX futures into backwardation, a telltale sign that the market is under stress, as near-term contracts became more expensive than longer-dated counterparts.