Weekly Market Recap
Volatility creates opportunity
Week in review
- Australian unemployment rate falls to 6.8%
- U.S. implements average inflation targeting framework
- NZ Real GDP contracts 12.4% y/y in 2Q.
- Australia retail sales
- U.S. PMI for services and manufacturing
- European PMIs for services and manufacturing
Thought of the week
A by-product of central bank action since the global financial crisis (GFC) and the provision of liquidity to aid financial stability has been lower levels of volatility in the equity market. Volatility on the S&P 500, as measured by the VIX Index, hovered in the low teens in the years following the GFC. But earlier this year spiked to its highest levels since the GFC and remains relatively high compared the past few years. Volatility in bond and foreign exchange markets, by contrast, has fallen back. Why the divergence? There are clear event risks on the horizon, such as the U.S. presidential election and the timing around a vaccine, but other factors are also at play. The increasing share of individuals trading the market may be one. The chart below shows the sharp rise in individuals trading in the U.S. equity market this year This may be more flighty money that is moved with hearts rather than minds. However, volatility creates opportunity.
Another reason to expect more volatility in equities
Individual share of U.S. equities trading volume
JPMorgan Global Research Enhanced Index Equity Fund
To achieve a long-term return in excess of the benchmark by investing primarily in a portfolio of companies, globally; the risk characteristics of the portfolio of securities held by the Sub-Fund will resemble the risk characteristics of the portfolio of securities held in the benchmark.