Pandemic volatility spikes exceeded GFC
Intra-day volatility on the ASX 200 during the COVID-19 pandemic was greater than during the Global Financial Crisis (GFC), according to Allan Gray.
During March, there were nine trading days with volatility above 10%, seven of which were consecutive compared to four days in total during the GFC.
Volatility exceeded the GFC between 2007-2009, Black Monday in 2011 and the victory of Donald Trump in 2015.
The Cboe Volatility ‘VIX’ index, which tracked 30-day implied volatility of the S&P 500 and indicates fear in the market, peaked at 85.4 on 13 March, its highest level on record.
In contrast, levels during October 2009 after the crash of Lehman Brothers averaged 64.
Simon Mawhinney, chief investment officer at Allan Gray, said: “Increased uncertainty, fear, forced and panic selling, as well as reduced liquidity, are all contributing factors and all measures show a recent spike in, and currently elevated levels of, volatility.
“Despite having fallen from its peaks, the COVID-19 volatility remains about twice the average.”
However, he said, extreme volatility could present buying opportunities for investors with a long-term time horizon.
“Volatility is your friend when investing for the long term; extreme fluctuations in price present excellent long-term buying opportunities,” he said.
Intra-day volatility of the ASX 200 since 1 January, 2000
AUTHOR
Laura Dew
Recommended for you
Bell Financial Group has announced a 44 per cent decline in half-year net profit after tax but record funds under advice as it transitions into a diverse wealth management business.
Having predicted three ETF trends for Australia at the start of this year, State Street has shared how these are tracking and whether Australia will successfully reach US$30 billion ETF inflows for 2025.
Magellan fund manager Nikki Thomas is to depart next month as the firm reviews its range of global equity funds and transitions her High Conviction fund.
Sydney-based alternative fund manager East Coast Capital Management has formed its first advisory council as it enters its next phase of growth.
