Volatility is on the rise, liquidity is getting tougher in certain places, and anxiety is on the rise.
By Mohamed A. El-Erian
FORTUNE — Those trading in many market segments would have noticed a subtle change last week: Volatility is on the rise, liquidity is getting tougher in certain places, correlations are morphing, and anxiety has increased. Moreover, rather than impact all market segments simultaneously, such dislocations seem to be cascading gradually from the least liquid to the more liquid ones.
This could well be just a blip. After all, we have had similar episodes in the last two years. Alternatively, it could be indicative of a deeper change; and, if it is (as I suspect), the related underlying shifts could be secularly beneficial or could well signal more volatile times ahead.
The answers to these questions are consequential. They speak to whether investors should expect the strong rally in risk assets to resume or whether markets face the possibility of a correction; and they have an important influence on the prospects for growth and jobs.
So let us take a look at some of the key issues, starting with Japan:
