The world's biggest investor thinks the US stock market could get bumpy

Stock market investors in the US should beware of a “bumpy road” until the end of the year, according to the global chief investment strategist at BlackRock, the world’s biggest asset manager with $4 trillion under management.

Writing in the Financial Times, Richard Turnill said that low volatility and markets at record highs could create a choppy ride for investors as the US braces for elections in November.

“In fact, realised equity volatility today is at the lowest level seen at this time in any presidential election year since the 1940s,” Turnill said.

“While volatility is low, the S&P 500 Index is at a record high. Combined with the uncertainty that accompanies even a “typical” election season, the scene is set for meaningful market gyrations,” he said.

While the road to December will be bumpy, where the stock market ultimately ends up by the end of the year may have more to do with how much profit companies make, rather than the general political picture. Stocks with room to grow their earnings will fare better than those that don’t, no matter how cheap the latter appear.

Here’s Turnill again:

“As unique and notable as this election may be, equity markets tend to react more to macroeconomic factors and corporate earnings than they do to elections. In fact, we expect earnings will be a key determinant of how the US stock market ends in 2016.”

“The main takeaway for investors in a low-return, high-volatility world is to be selective. We prefer quality companies that can increase earnings and dividends in a low-growth environment.”

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