Volatility strikes: buying opportunity or bear market ahead?
By Sebastian Cheek, 9 Feb 18
Volatility made its long-anticipated return to global equity markets this week, with US equities recording their biggest drop since the 2008 financial crisis. Here, eight investors outline what the return of volatility means for stock markets – good buying opportunity, or is it the start of a prolonged downturn?
However, he said while short-term trends in the stock market are almost impossible to forecast, economic and earnings fundamentals continue to be supportive for equity valuations for three key reasons.
He explained: “First, global economies are in a synchronised expansion, while interest rates and inflation are still relatively low in developed countries. In addition, the backdrop for corporate earnings, which have been growing at a double-digit pace in the US and other important markets, is favourable. Finally, recently passed US tax reform legislation is likely to lead to a pickup in domestic economic growth and even stronger corporate profits in 2018.
“Market turbulence is a fact of life in equity markets – a fact that some investors may have overlooked amid the remarkably low volatility seen over the past couple of years.”