The ASX had one of its wildest days on record yesterday, turning a 1.62% early loss into a 2.72% gain by the close.
It was a similar story in the US overnight, except in reverse. The Dow and S&P 500 turned early gains of around 2% into losses of 1.29% and 1.35% respectively as traders sold heavily into the close.
That’s the type of volatility that will make traders and investors nervous and keep them on their toes. But it’s also the type of volatility that we are all going to have to get used to, according to CommBank CEO Ian Narev.
Speaking to Leigh Sales on the ABC’s 7.30 Report last night, Narev said that the current themes the market is reacting to – “a slight slowing in China, US monetary policy, Europe” – have been known for a long time.
“They’re not actually new themes,” Narev said.
He said that coming out of the financial crisis we’ve been “in a really unique period in the world’s financial history” with everyone wondering “how is all this going to play out?”
His view? Get used to volatility:
As the US raises interest rates, as China’s growth inevitably slows as it was always going to. And because markets are jittery, whenever there’s the first sign of slightly bad news they tend to react very swiftly. Then there’s algorithmic trading, which sort of doubles down on market trends and you get a lot more volatility.
So we’ve got to get used to the fact that over the next few years there is just going to be more volatility. And we’ve got to keep our eyes really clearly on the long term.
You can read the transcript of the rest of the interview here.