Volatility is part and parcel of equity investing, and this short-term spike should therefore not be seen as out of the ordinary. If anything, the relatively subdued volatility markets have enjoyed year to date has been the outlier. The real question becomes whether this increased volatility is the start of something more foreboding for markets?
Over the first three weeks of August, global and local equity market volatility has spiked sharply.
Equities have sold off and safe-haven assets, such as gold and treasury bonds, have outperformed. Investors’ appetite for risk has waned in the face of increasing concerns about the sustainability of global economic growth, fuelled by heightened trade tensions, geopolitical uncertainty and fears that monetary and fiscal stimulus may no longer be enough to sustain growth in the real economy, meaning an increased likelihood of a global slowdown, or even recession.