Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

Volatility levels set to spike

global-equities/simon-ho/quantitative-easing/

14 January 2020
| By Oksana Patron |
image
image
expand image

Lingering geopolitical uncertainty coupled with a 10-year bull run are expected to generate a spike in market volatility over the next 12 months and demand for more defensive investment strategies, according to Triple3 Partners.

Last year saw muted volatility as the US equity markets continued to rally, however now investors question whether the markets would continue their run in 2020 which might be a turning point.

The firm’s chief investment officer, Simon Ho, said: “A 20% rally in US equities was unusual considering the Quantitative Easing (QE) program has been in place since 2008 and markets have been bullish during this time, but US interest rate policy has been buoying the market.

“People have effectively been borrowing money for free, and when that gets taken away, there’ll be some issues. A 10-year bull market by definition has to stop at some point.”

Ho said in anticipation of increased volatility, investors should be looking to protect their portfolios this year and for that a more defensive play would be required, with volatility-based funds likely to deliver strong returns in a sell off.

“Retail investors in particular would do well to put their money into something that’s negatively correlated to equities to ensure they’re protected over the course of 2020,” he said.

“With the strong investment performance that equity investors have enjoyed since 2008, it would now be prudent for them to consider portfolio protection.

“Investors need to know that with every year that goes by, there’s a greater risk there will be some sort of pull back, but if you buy volatility derivatives, for example, you can get a negatively correlated performance relative to any underlying equities.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

3 weeks 3 days ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

1 month ago

So we are now underwriting criminal scams?...

7 months ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

3 weeks 5 days ago

While the profession continues to see consolidation at the top, Adviser Ratings has compared the business models of Insignia and Entireti and how they are shaping the pro...

1 week 4 days ago

ASIC has released the results of the latest adviser exam, with August’s pass mark improving on the sitting from a year ago. ...

2 days 5 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND