Fund managers appear calm about recent market volatility, with some saying economic fundamentals were still good.
Earlier in the week equity markets plummeted in Asia, Europe and the US with losses of up to 3%, while on Monday the Dow Jones Industrial Average dived nearly 1,600 points – the biggest one-day fall in its history.
The markets rallied mid-week but fell again with the Dow Jones dropping 19 points at the end of Wednesday.
The equities sell off, which began last week, started after stronger wage growth figures in the US prompted speculation of sharper rate rises to forestall inflation.
Steven Andrew, multi-asset fund manager at M&G Investments, said recent US equity moves brought levels back to where they were in December.
“It is often the case that after very rapid gains you can see equally rapid reversals and this can often take place without an obvious catalyst.”
He stressed that from a fundamental standpoint little seems to have changed. Increasing wages should ultimately be a good thing for the US economy and corporate profits, he said.
“These considerations and the rapid nature of price suggests that there may be some non-fundamental drivers of this price action and our predisposition would be to add equity exposure.”
Stephen Jones, Kames Capital’s chief investment officer, said the market fluctuations seen over the past week were far from out of the ordinary, but added: “Perhaps we have forgotten that markets always have been dynamic, occasionally volatile, and brutal. This is a complacent positioning correction, coupled with a month-end rebalance after what were – we should not forget – super strong returns in January and December for anything tagged as ‘risk’.”
Jones stressed that there was nothing of concern based on fundamentals and that economic prospects were still good.
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