Volatility levels set to spike

global equities simon ho quantitative easing

14 January 2020
| By Oksana Patron |
image
image
expand image

Lingering geopolitical uncertainty coupled with a 10-year bull run are expected to generate a spike in market volatility over the next 12 months and demand for more defensive investment strategies, according to Triple3 Partners.

Last year saw muted volatility as the US equity markets continued to rally, however now investors question whether the markets would continue their run in 2020 which might be a turning point.

The firm’s chief investment officer, Simon Ho, said: “A 20% rally in US equities was unusual considering the Quantitative Easing (QE) program has been in place since 2008 and markets have been bullish during this time, but US interest rate policy has been buoying the market.

“People have effectively been borrowing money for free, and when that gets taken away, there’ll be some issues. A 10-year bull market by definition has to stop at some point.”

Ho said in anticipation of increased volatility, investors should be looking to protect their portfolios this year and for that a more defensive play would be required, with volatility-based funds likely to deliver strong returns in a sell off.

“Retail investors in particular would do well to put their money into something that’s negatively correlated to equities to ensure they’re protected over the course of 2020,” he said.

“With the strong investment performance that equity investors have enjoyed since 2008, it would now be prudent for them to consider portfolio protection.

“Investors need to know that with every year that goes by, there’s a greater risk there will be some sort of pull back, but if you buy volatility derivatives, for example, you can get a negatively correlated performance relative to any underlying equities.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

3 weeks 3 days ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

4 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 months ago

ASIC has taken action against a Queensland adviser who was sentenced last May for misappropriating $1.8 million from his clients....

2 weeks 6 days ago

AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions. ...

2 weeks 6 days ago

A former Insignia Financial C-suite exec has taken on a leadership role at MUFG Retirement Solutions as it announces chief executive Dee McGrath will depart after six yea...

3 weeks ago

TOP PERFORMING FUNDS