Volatility 2018

24 October 2018

In the past, national and geopolitical tensions were, in my opinion, significant and generated over time, usually with the position deteriorating to some depths before being resolved. The world seems to move faster these days, with tensions sometimes created and conducted over social media, usually Twitter, causing tensions, possible resolution and of course market reaction at a far faster pace than we have seen before. 2018 thus far is a case in point with the recent addition of trade wars.

Readers of this blog are likely to be aware that there are various indices around the globe that detail the value of shares in their respective trading areas. To demonstrate volatility thus far over 2018, I have selected a few below. You will see that this is not an exhaustive list, but I hope creates a flavour of global market volatility in 2018.

Index

Level at

02 January

2018

Level at

26 March

2018

Level at

01 June

2018

Level at

15 October 2018

FTSE 100 (UK)

7648

6888

7701

7029

Dow Jones (USA)

24824

24202

24635

25250

Dax 30 (Germany)

12871

11787

12724

11614

SZSE Component Index (China)

11178

10564

10169

7444

Examples only. Approximate only

Although these are only examples, they provide a reasonable demonstration of the volatility experienced by some investors over the first ten months of 2018. You can see that in the example of the FTSE 100 and the Dax 30, we have seen a January to March fall of approximately 10% in the former and approximately 8.5% in the latter, with subsequent rises to June of approximately 11.8% and 8% respectively. The fall to mid-October 2018 from the 01 June 2018 point is approximately 8.8%, using the FTSE100 index as an example. This not an indicator of future volatility, but provides some demonstration of market movements, both down and up, over a short period of time.

We have also seen volatility in many currencies, notably Sterling and Dollars. We believe this will continue throughout 2018. Oil prices have also seen significant volatility over the year to date, with a generally rising theme (as an example, the 52-week price range for Brent Crude is currently $55.45 - $86.74 per barrel / source: Bloomberg as at 24/10/2018, with the current price at approximately $76.35).

Volatility is not necessarily a bad thing – however, it is important to understand both your attitude to, and tolerance of, investment risk when considering pensions and investments, as examples. The team at Chapters Financial can help you in the process to ensure that your understanding of risk and volatility are correct before investing.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS

Director, CFP Chartered FCSI

Chartered Financial Planner

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