Whitechurch Asset Views - March 2018
February started where January left off – providing investors with a timely reminder that global markets fall quicker than they rise. Strong US employment numbers and evidence of wage growth fuelled investor concerns over inflation and the prospect of a more aggressive US interest rate cycle. This led to a sharp sell-off in equity markets in the first half of the month, with all global stockmarkets being sold off indiscriminately.
The spike in volatility was pronounced. After surging to a high of 50.3 at the beginning of the month (the VIX’s highest reading since mid-2015), the “fear index” ended the month below its historic trend level of 20, as investor risk aversion came and went. This was reflected in risk assets which following some of the heaviest falls for the past two years early in the month recovered much of the ground from mid-month onwards. However, volatility may have come and gone for the meantime but the cause of investor concerns remains unresolved and it is reasonable to expect that 2018 is not going to be a repeat of the smooth rising markets witnessed last year.