Invest
Where has this volatility come from?
In the wake of February’s market plunge, investors are wondering not only whether this volatility will continue, but where it came from in the first place.

Where has this volatility come from?
In the wake of February’s market plunge, investors are wondering not only whether this volatility will continue, but where it came from in the first place.

According to AMP Capital chief economist Shane Oliver, the answer is simple. Speaking in an AMP Capital insights paper, he said there’s a link between share market volatility and inflation.
Further, he explained that as investors recalibrate their expectations of share market performance, volatility and inflation react accordingly.
“Investors have been used to low volatility for so long, low inflation, low interest rates, low bond yields and that was factored into many investment markets, obviously including share markets,” he said.
“Now we are moving into a world of possibly higher inflation, higher interest rates, investors have to reprice and adjust their expectations.”
Continuing, Mr Oliver observed that market commentators and investors are seeing increased inflation in the US, with some considering this a positive while other regard it as a negative.
“For example, if interest rates go up, bond yields go up, that makes share markets a little less attractive compared to bonds and cash at the margin, and investors need to make that adjustment,” Mr Oliver said.
“[Further] you’ve got this ongoing battle with some saying inflation’s on the way, higher interest rates – that’s bad.
“At the same time, others are saying we’ve got stronger profits growth coming through, so it’s not that bad. I think we’re seeing a bit of a battle between the bulls and the bears going on.”
Reflecting on the year so far, Mr Oliver said it’s been “a bit perverse in a way”, given that the good news of wage growth and a long-awaited pick-up in inflation has triggered investor anxiety.
With this in mind, he reminded investors that higher inflation is not a bad thing, it just means they “have to adjust their expectations and that’s what’s causing the volatility”.

Stock market
US lawmakers quiz key GameStop players
Notorious retail investor Keith Gill is facing a grilling from the US congress and the possibility of a class action lawsuit due to his alleged part in the GameStop saga, with policymakers convinced h...Read more

Stock market
Facebook’s news ban feared to have implications for the sharemarket
Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for anothe...Read more

Stock market
Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states. ...Read more

Stock market
Experts blast Treasurer’s plan to permanently ease disclosure laws
Sharemarket disclosure laws could be permanently relaxed as the Treasurer looks to shield businesses from disgruntled shareholders, but legal experts have labelled Frydenberg’s reasoning “madness...Read more

Stock market
Is your portfolio climate change ready?
The vast majority of investors believe climate change will have an impact on their portfolio, yet not all investors are readying their asset allocation to take advantage of a net zero world, new resea...Read more

Stock market
Sharemarket penalises mining firms abusing human rights
The sharemarket has been a powerful tool in holding to account mining companies engaged in human rights violations, but informational campaigns by civil society groups and the media are the real aware...Read more

Stock market
ASX warns against the ‘gamification’ of investing
ASX chief executive Dominic Stevens has warned against the gamification of equities, as young traders lock their gazes on chasing returns at the expense of any real sharemarket knowledge. ...Read more

Stock market
What is a stock market bubble?
If history is to be trusted, stock market bubbles inevitably burst and end in a stock crash, with devastating effects on your portfolio. How can you protect your investment from the negative effects o...Read more

Stock market
US lawmakers quiz key GameStop players
Notorious retail investor Keith Gill is facing a grilling from the US congress and the possibility of a class action lawsuit due to his alleged part in the GameStop saga, with policymakers convinced h...Read more

Stock market
Facebook’s news ban feared to have implications for the sharemarket
Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for anothe...Read more

Stock market
Stock market bubble fears overblown: Vanguard
Fears of a stock market bubble are “overblown” despite equity markets around the world closing in on all-time highs, an industry analyst states. ...Read more

Stock market
Experts blast Treasurer’s plan to permanently ease disclosure laws
Sharemarket disclosure laws could be permanently relaxed as the Treasurer looks to shield businesses from disgruntled shareholders, but legal experts have labelled Frydenberg’s reasoning “madness...Read more

Stock market
Is your portfolio climate change ready?
The vast majority of investors believe climate change will have an impact on their portfolio, yet not all investors are readying their asset allocation to take advantage of a net zero world, new resea...Read more

Stock market
Sharemarket penalises mining firms abusing human rights
The sharemarket has been a powerful tool in holding to account mining companies engaged in human rights violations, but informational campaigns by civil society groups and the media are the real aware...Read more

Stock market
ASX warns against the ‘gamification’ of investing
ASX chief executive Dominic Stevens has warned against the gamification of equities, as young traders lock their gazes on chasing returns at the expense of any real sharemarket knowledge. ...Read more

Stock market
What is a stock market bubble?
If history is to be trusted, stock market bubbles inevitably burst and end in a stock crash, with devastating effects on your portfolio. How can you protect your investment from the negative effects o...Read more