Search for certainty

Mark Seymour, fund manager at PSG Fund Management says that taking a closer look at the short-term volatilities on the market provides material for an interesting story.

With talk of interest rate hikes in the US, the cooling of China and renewed worries over terrorism, the markets are behaving a little jittery of late.

On the local front, resources have always shown to be more volatile, running with an average 20-day standard deviation of 1.52% for the last 18 months, financials with a 0.86% standard deviation, industrials also with a 0.86% standard deviation and property unit trusts with 0.80% standard deviation.

On the whole, the All Share Index has had a running average 20-day standard deviation of 1.02%.

Over the last two months the picture has changed somewhat though.

The volatility of resources actually came down from 1.7% to 1.3%, financials going up from 0.5% to 1.1%, industrials also from lows of 0.5% to present levels of 0.9% and property unit trusts moving lower from a two month high of 1.1% to 0.5%, at present.

The largest of these changes have taken place over the last week though. Is this largely the result of aggressive selling and possibly the start of some sector rotation?

Besides this, the overriding message coming from the equity team is that equities remain attractive, despite the short term uncertainties that are currently present.