Watch: 60 seconds with Johanna Kyrklund on investing in volatile markets
Johanna Kyrklund comments on why recent market volatility could create an opportunity for investors who take a flexible, active investment approach.
China dominates market sentiment
China has dominated headlines this summer, first of all with the correction in its stockmarket in July and then more recently with the decision to adjust its currency in August.
But why has China caused such widespread volatility across financial markets around the world?
The issue is broader than just China – the problem is that the financial crisis of 2008 has cast a long shadow and as a consequence the economic recovery of recent years has been more anaemic than investors were expecting.
The decision by China to adjust its currency is symptomatic of a world where global demand is weak and therefore currency movements can have a disproportionate impact on the fortunes of any given economy.
Investors need to be flexible
We expect this to continue. We are in an environment where global growth is slow and as a consequence investors, periodically, will be concerned that the recovery could stall.
However, interest rates will remain low. Even in the US where the Federal Reserve is planning on raising interest rates we expect the rate hiking cycle to be quite shallow.
With these low interest rates asset class valuations will remain supported. Also we see value in some of the more cyclical assets such as emerging markets, which should provide opportunities for a more flexible and active investment approach.sets such as emerging markets, which should provide opportunities for a more flexible and active investment approach.