Volatility is back, Brandywine Global says
Volatility has made a comeback to the stock market and is likely to stay for the duration of this cycle, according to Legg Mason affiliate Brandywine Global.
However, volatility should be now viewed as a yellow flag for the investment cycle, Brandywine’s director of global macro research, Francis A. Scotland said.
The return of volatility was a sign that the Fed has become more confident of the economic expansion and that normalisation had entered a familiar phase.
“It is the first normalisation cycle since the Great Financial Crisis, yet no one knows what normal looks like,” Scotland said.
“Complicating the outlook is the simultaneous and accelerating contraction in the central bank’s balance sheet, something it has never done before.”
He added that, based on the history, the central bank tended to keep tightening until there was another crisis and/or a recession.
He warned that if the market was right, “something would come along that convinces the Fed to stop or change course”.
“It’s impossible to know in advance what that might be, although there are range of suspects. But all incoming Fed chairs are inevitably tested, earlier usually rather than later. In the interim, more churning and volatility in capital markets is likely to be the norm,” he said.
AUTHOR
Oksana Patron
Recommended for you
Selfwealth has provided an update on the status of its scheme implementation deed with Bell Financial Group as well as whether rival bidder Svava remains in the picture.
Magellan Financial Group has reported its first half FY25 results while appointing a new chief financial officer and promoting Sophia Rahmani to chief executive.
Schroders Australia has launched two active ETFs and plans to further expand its listed range over the year ahead.
Platform Netwealth has reported its financial results for the first half of FY25, reporting an 80 per cent increase in net flows, with its CEO viewing a “huge opportunity” from private assets.
