A degree of volatility returned to UK equity markets at the start of 2018, albeit briefly, before the benchmark indices returned to the relative calm that we witnessed throughout much of 2017. Things became a little more febrile towards the end of September, although you’re left with the suspicion that these corrections – assuming that’s the appropriate designation – were essentially ripple effects from across the Atlantic.
People tend to get a little too excited whenever there’s a shake-out in the market; after all, a study by Credit Suisse shows that it took only seven trading days for the CBOE VIX index to revert to the mean following the February sell-off. But it’s probably worth noting that in several instances when a spike in volatility followed a period in which stock markets had been becalmed, such as 2004-06, they have heralded index highs. We will obviously have to wait for the outcome on that score, but it is possible to draw some conclusions about relative valuations.
Corporate earnings and institutional outflows