Investors have been warned to expect more volatility across all major asset classes following an unusually calm summer, with the latest stock market correction a sign of coming turbulence.
"Summer of 2014 saw the lowest volatility for all major asset classes in 25 years," says Jack Malvey, chief global markets strategist at BNY Mellon Investment Management. "That's not sustainable."
In recent weeks, stock markets have fallen due to a range of factors such as geopolitical risk and fears of a triple-dip recession in Europe. Malvey says the focus is now on the resilience of the US economy as investors scrutinise corporate earnings and try to decide if risk assets have run their course.
However, Malvey says he thinks the correction will "burn itself out" by the end of October or November when investors will go back to looking at fundamentals.
Dave Daglio from The Boston Company, an asset manager owned by BNY Mellon, echoed the remarks about choppy markets.
"Equity-market volatility was unusually low in 2013, and we fully expected it to return to more normal levels at some point," he says.
Daglio says he has revised down expectations for returns in the US market, but claims US stocks can still offer attractive rewards compared to other asset classes.
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