Market Trends and Volatility ?
(Third Quarter 2011)

Does increased market volatility bring better opportunities or just higher risk ? There is plenty of evidence to support either view, but most answers need to be qualified with a “it depends …” For example, the recent spikes in volatility have brought higher correlations between asset classes and between individual stocks, thus reducing the ability to pick winning investments at the same time when it becomes harder to diversify the portfolio. Also, broad market “macro themes” such as the stability of the European economy or price of commodities have worried investors and caused portfolio realignments based on gloomier scenarios.

At some point, and with the benefit of hindsight, the current environment will be better understood as investors enjoy once again the prevailing, and beneficial, historical trends. But for now, it is a volatile and uncertain environment in the market. In this newsletter, we take a look at the impacts of higher volatility on investment themes to see if there are trends in place.

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