An exceptional 10-year bull run coupled with lingering geopolitical uncertainty is likely to generate a spike in market volatility over the coming 12 months and demand a more defensive investment strategy, according to Triple3 Partners’ chief investment officer, Simon Ho.
Volatility is recorded via the VIX – a real-time market index that measures the market’s expectation of 30-day forward-looking volatility. It is calculated from the price inputs of the S&P 500 index options, and is a measure of implied volatility, market risk and investor sentiment.
Mr Ho said implied volatility was muted in 2019 by historical standards, and the VIX finished the year at 13.7 – although it did experience a high of 28 just after the new year (as a comparison, the VIX hit an all-time high of 80 in 2008 and its long term average sits around 16).
“It was surprising that US equity markets continued to rally during 2019 and the question is whether markets would continue their run into 2020.
“A 20 percent rally in US equities was unusual considering the Quantitative Easing (QE) program has been in place since 2008 and markets have been bullish during this time, but US interest rate policy has been buoying the market,” he said.
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