Photo: BlackRock via YouTube
Russ Koesterich, the global chief investment strategist for BlackRock’s iShares ETF business, says on the iShares blog that the elevated levels of stock market volatility are unlikely to go away “for the remainder of the year.”Koesterich sees three reasons that financial markets will be volatile for the foreseeable future:
- Weaker global growth is getting priced in. Koesterich writes, “As the harsh reality of the worst recovery in the post-World War II period keeps extinguishing whatever optimism investors are able to generate, investors are downwardly revising their expectations for both the global and US economies.”
- Market momentum has disappeared. Koesterich notes that “as of late June, the six-month momentum for the S&P 500 was barely 5%, down from 34% in late March.” Koesterich calls this an indicator of market sentiment, and as investors increasingly put on hedges to protect against further downside, markets will get more volatile.
- Credit spreads are widening. Koesterich writes, “While spreads between various credit instruments have so far risen only modestly (and not enough to signal a market meltdown), rising spread environments typically coincide with increases in equity market volatility.”
Read more of Koesterich’s thoughts at isharesblog.com.