One Man’s Opinion: Will Volatility Remain Elevated In The Near Future?

ManWhile many investors may have lost their annual gains in equities due to the recent slide, there are others who have built high cash positions, said Kristina Hooper of Alliance Global Investors.

Allianz expects heightened volatility with a downward bias in the coming weeks and investors with a long enough time horizon should hang around because markets are likely to see a turnaround by the end of the year, she noted.

Economist John Maynard Keynes had famously said “in the long-term we are all dead.” Asked if she regrets the advice that people should remain invested when the markets continue to fall, Christina answered in negative. Investors need not worry too much about short-term movements. Investors lose the most money when they are not able to stay invested because they often don’t get back in when the markets begin to recover, she explained.

The bull market is likely to continue with a much lower returns trajectory and narrowing leadership and more volatility, said David Donabedian, chief investment officer at the Atlantic Trust.

When argued it would even be difficult to post single digit returns this year if markets continue with the current trend, David said investors need not read too much about what’s happening in the markets on a given day, particularly when the S&P 500 index has witnessed very substantial gains going back 2009.

Atlantic Partners expect the S&P to end up this year, but more of single digit result compared to the double digit gains that was seen the previous years. The conditions for a bear market are simply not there; the economy continues to grow at a respectable pace and chances of a recession are quite low.

The yield-curve is sloping positively and while the Fed is getting ready to raise interest rates a bit, they are starting from zero. So monetary policy is going to be accommodative for quite some time, and it’s a bull market where money can be made, he observed.

Asked if the Federal Reserve delivered those gains early by inflating the quality of asset markets since markets fully priced in the gains that would arguably accrue now as the Fed raises rates from zero, Christina said while it is true there has been some delivery early on, it doesn’t mean the markets have hit the end of the road. Gains are going to be slower and choppier going forward nevertheless, she argued.

Asked what would drive future gains P/E multiples are already at 17-18 times, Kristina said revenue growth will drive equity prices. There are certain sectors including technology and healthcare that are witnessing faster revenue growth. Valuations for these sectors are also attractive and active stock picking skills would be required.

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About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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