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'Volatility comes in clusters'

In a short video interview, Australian Equities Portfolio Manager Dermot Ryan sights the recent share market selloff as an indicator for potential further volatility. While more volatility can mean higher levels of anxiety for some investors, it can also bring opportunities to those able to stay calm during these periods.

Investors glued to their share portfolio screens in recent weeks, following the recent abrupt share market selloff, should expect to experience more of the same in the months ahead, according to Dermot Ryan, AMP Capital Income Equity Fund Co-Portfolio Manager.

While more volatility can mean higher levels of anxiety for some investors, it can also bring opportunities to those able to stay calm during these periods, Ryan adds.

“Volatility, where we haven’t seen a lot in a while, is normally a sign the market regime is shifting somewhat, and this often comes in clusters. We expect we’ll see further contained outbreaks of volatility” says Ryan.
 

The share market rout, which resulted in a 4.6 per cent drop in the value of the ASX200 over two days, followed the United States share market, which had its worst and most volatile day since 2015.

“We saw broad based selling… I saw almost every name in red,” Ryan describes.

Ryan likens the volatility during the last week to other periods of stimulus changes such as the “taper tantrum” in 2013, which he notes was also proven to be a buying opportunity for quality assets for patient investors.

He emphasises that fundamental analysis points to a strong outlook for economic growth both globally and domestically.
   
While the selloff in the Australian share market was broad based, it was concentrated in those companies, which have rallied the most in recent months – Ryan points out – including some of the smaller resource companies as well as asset management firms.

In terms of buying opportunities, Ryan singles out the real estate investment trusts segment.
 
“Global growth has been running hot and some in the market have forgotten that this has been facilitated by large amounts of monetary stimulus, which needs to be slowly withdrawn now that sustained economic growth has been achieved,” Ryan explains.

“The removal of stimulus in a measured way is a perfectly reasonably proposition although it has yet again caught the unprepared by surprise. Given rates are going to rise in the Atlantic economies over the coming months we may see further jitters,” he says.
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