Market Volatility Returns

November 20, 2018

We are in the midst of a maturing business cycle where earnings growth is slowing and current investor sentiment, worried about trade tariffs and rising interest rates which adds fear uncertainty and doubt and – voila! volatility returns.

The rational investor recognizes this volatility for what it is – (it’s just volatility!) and understands its non-permanence and the inevitable recovery.

This is the perfect environment for another type of investment manager to succeed – the value manager sees this as an opportunity to purchase quality stocks, with consistent earnings and dividends at lower prices.  As well, have the quality stocks purchased previously to perform as unsustainably high priced stocks decline from their peaks and a rotation to stocks with better valuation occurs.

For comments on this market, read the article by Stephen Lingard, Franklin Templeton Multi-Asset Solutions.

A positive development over the last few decades is the rise of the global median income.  In 2003 half the world population lived on less than 1.090 international- $ per year and the other half lived on more than 1,090 international – $. This level of global median income has almost doubled over the last decade and was 2,010 international – $ in 2013.

Our World in Data – Max Roser

… and this occurred within a decade that experienced a US real estate and financial crisis (2008) followed by the Great Recession (editor’s note)