Aussie markets becoming complacent, Lonsec says

15 August 2018
| By Nicholas Grove |
image
image
expand image

While volatility has died down since the dramatic spike witnessed in February 2018, a return to near-historic lows should raise eyebrows among investors, Lonsec says.

According to the research house, the S&P/ASX 200 VIX Index, a measure of implied volatility in the Australian share market, closed last week at 9.79 points, falling back below double-digits and a far cry from February’s high of 22.16.

“While fundamentals still provide some support for a low volatility environment, with interest rates at ultra-low levels and earnings growth generally living up to expectations, investors should be prepared for more heightened volatility in the second half of 2018,” Lonsec said.

Lonsec also noted that over the past 10 years, the August and September period has seen the biggest average moves in the volatility index for both the Australian and US markets. And while volatility is not always a bad thing, shares are particularly vulnerable when a low-volatility environment comes to a grinding halt, it said.

Also, with the US Federal Reserve due to hike rates again in September, and the UK grasping for a Brexit deal ahead of the October European Summit, there are reasons to be nervous.

“And the fears are not only confined to developed economies: Turkey's currency has plunged to record lows and is having knock-on effects in other emerging markets,” Lonsec said.

“On the trade front, while the US-China tariff war is yet to hit developed markets hard, the negative impact is starting to creep into measures of manufacturing activity and export volumes in the US and Asia.

“In other words, this is no time to be ignoring history.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 6 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 day 3 hours ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 4 days ago