Securities and Exchange Commission chairman Gary Gensler spoke Friday about growing volatility in US stock and bond markets and reassured 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 times of order and times of stress,” Gensler said in opening remarks at the SEC’s annual conference on financial market regulation Friday. “Such resilience helps ensure shockwaves don’t propagate in the real economy.”
US fixed income and equity markets have fallen sharply in recent weeks, culminating in a sell-off on Thursday that saw the S&P 500 SPX,
fall by 3.6% and the Nasdaq COMP,
5% collapse, the worst daily showing since the peak 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” and to rising inflation that has forced central banks around the world to raise interest rates. “In such times of…economic uncertainty there is a transition and we are reminded of the importance of financial resilience,” he said. “I don’t think we can take it for granted.”
The regulator pointed to tensions in money market funds and municipal and taxable bond funds in the wake of the 2020 COVID market crisis as evidence that regulators need to remain vigilant for 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 should always think about ways to improve efficiency, resilience and transparency in our markets.”