With the Vix index at near record lows, BlackRock’s global chief investment strategist Richard Turnill has batted away fears that heightened volatility is imminent.
Instead he claimed the “steady economic environment should help keep equity market volatility relatively low”.
Periods of low volatility have historically lasted a long time, he added.
The Vix, which measures volatility on the S&P 500, dipped to 9.77 earlier in May, nearing the lowest level seen December 1993 and well below the long-term average of 20.
However, the low is not a signal to sell or of higher volatility being just round the corner, Turnill said.
“We believe a steady economic environment should help keep equity market volatility relatively low, with a sustained and synchronized global expansion in full swing,” he said.
“We see few signs of late-cycle equity market complacency, with diverse leadership in major markets.
“Yet we believe investors should be wary in asset classes where low volatility has resulted in crowded trades.”
While it would be impossible to predict what could trigger a shift to heightened volatility, Turnill said possible sparks could be a credit crunch in China or aggressive tightening by the Federal Reserve.
However, Turnill added: “For now, we believe equity investors are being compensated to take risk, particularly outside the U.S. Bottom line: Look beyond short-term volatility and stay focused on fundamentals.”
