Is It Time to Consider European Low Volatility Again?

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Strategy Espresso

It was another rollercoaster week. After months of focusing on the good news and shrugging off the bad, US equity market sentiment sharply reversed, leaving most major US indices only modestly positive for the year. After that, European stocks rallied once again and US equity futures erased their earlier losses. Nevertheless, markets remain extremely skittish. The rise in volatility has caught investors by surprise. However, by historical standards, current volatility is approaching the median level.1 In addition, a late cycle is often accompanied by higher levels of volatility (see Figure 1). In spite of the recent rise in volatility, State Street Global Advisors still expects both global and eurozone GDP to remain solid, forecasting that growth will reach 3.8% and 1.9%, respectively, by the end of 2018.*