Wingate Asset Management chief investment officer Chad Padowitz said the volatility in the US market has touched lows not seen since early 2007.
“The big unsettling dynamic in US markets is volatility. Since late 2011, as markets moved higher, volatility has trended lower,” said Mr Padowitz.
“The market’s extraordinary calm is illustrated by the S&P 500’s daily return has not exceeded [above or below] one per cent for 51 consecutive trading days up to 30 June 2014,” he said.
Mr Padowitz said this low volatility is not a requirement for future market weakness and believes it is a good barometer of elevated market risk.
“Only time will tell when world markets will see an upswing in volatility, but there is plenty in the mix to suggest its near-term possibility,” said Mr Padowitz.
“One source may be disappointing US corporate earnings later this year. The consensus expectation is that earnings per share [will] increase approximately 14 per cent for both 2014 and 2015,” he said.
Mr Padowitz explained investors should keep in mind that despite prolonged levels of market volatility risk never takes a permanent holiday, and should take a smoother, value-orientate approach to their international investment portfolios.
“It is important for investors to think differently and look through immediate data, and take a smoother, less risky approach to international investing,” Mr Padowitz added.
