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”.
RELATED ARTICLES
Stock market
6K Additive secures A$48 million through initial public offering on the Australian Stock Exchange
6K Additive, a prominent player in the advanced metal powders and alloy additions market, has made a significant stride by successfully completing its Initial Public Offering (IPO) on the Australian ...Read more
Stock market
Institutional investors increase stock allocations to 18-year high amid cautious market shifts
In a recent development, State Street Markets unveiled the findings of its latest State Street Institutional Investor Indicators, revealing intriguing shifts in institutional investor behaviourRead more
Stock market
FOREX.com launches in Australia to empower self-directed traders
StoneX Group Inc. (NASDAQ: SNEX) has announced the Australian launch of FOREX.com, expanding access for self-directed traders to a global suite of Contracts for Difference (CFD) products across ...Read more
Stock market
Westpac and CMC Markets strengthen partnership to enhance online trading services
In a significant move that underscores the evolving landscape of online trading in Australia, CMC Markets Stockbroking has been chosen as the preferred vendor by Westpac Banking Corporation to extend ...Read more
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
6K Additive secures A$48 million through initial public offering on the Australian Stock Exchange
6K Additive, a prominent player in the advanced metal powders and alloy additions market, has made a significant stride by successfully completing its Initial Public Offering (IPO) on the Australian ...Read more
Stock market
Institutional investors increase stock allocations to 18-year high amid cautious market shifts
In a recent development, State Street Markets unveiled the findings of its latest State Street Institutional Investor Indicators, revealing intriguing shifts in institutional investor behaviourRead more
Stock market
FOREX.com launches in Australia to empower self-directed traders
StoneX Group Inc. (NASDAQ: SNEX) has announced the Australian launch of FOREX.com, expanding access for self-directed traders to a global suite of Contracts for Difference (CFD) products across ...Read more
Stock market
Westpac and CMC Markets strengthen partnership to enhance online trading services
In a significant move that underscores the evolving landscape of online trading in Australia, CMC Markets Stockbroking has been chosen as the preferred vendor by Westpac Banking Corporation to extend ...Read more
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
