The current state of the market inevitably means continued volatility across credit, equity and commodities – but also potential investment opportunities.
Hedge fund, Man Group, have noted how emerging market cross-asset volatility was even bigger than after the Lehman Brothers’ collapse in September 2008.
However, strategists have pointed to volatility in the MSCI World Index in the aftermath of previous shocks.
“The silver lining is that the risk/reward for equities six months post the event – if you can stomach the volatility – has historically been excellent,” Man advised.
“In all cases, after the initial bounce, the MSCI World Index has made lower lows than the initial selloff before recovering.”
Post-Lehman, in September 2008, saw an immediate 9% rally before the index plunged another 40% to its lowest point.
In 2011, during the sovereign debt crisis, a rally of 7% was followed by a further drop before it rallied 17%t.
During the August 2015 China devaluation, the index enjoyed a 5% bounce, then a slide, followed by a 12% rally.
Continued volatility will see investors de-risking their portfolios. FX will continue to be fragile as the dollar strengthens on the back of the US rate cut.