Understanding Stock Market Volatility

While some investors saw the correction as a buying opportunity, others saw it as validation that equities, especially in the US, are expensive

Mark Preskett 6 March, 2018 | 8:57AM

Stock market trader Wall Street trading floor volatility

Market jitters often raise more questions than answers. It has been a long time since we experienced a 10% correction, so it is little surprise that it has garnered the headlines it has. Is this the start of something serious? Are the fundamental drivers such as earnings at risk of decline? Why are people so worried about wage growth and inflation? Isn’t this interest rate ‘normalisation’ and what the market wanted?

While some investors saw the correction as a buying opportunity, others saw it as validation that equities, especially in the US, are expensive and would fall under their own weight. Global earnings growth over the last 12 months has been very healthy at circa 18%, and if 2018 forecasts are to be relied upon, another 10% growth is in store.

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About Author

Mark Preskett  is a Senior Investment Consultant & Portfolio Manager for Morningstar UK                       

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