Watch Out for Volatility, Even in Rising Markets

30 April 2019
2 min read
Volatility Persists in Equity Rebound
Volatility Persists in Equity Rebound

Through March 31, 2019
Past performance is not necessarily indicative of future results. There is no guarantee that any estimates or forecasts will be realized.
Volatility is the annualized standard deviation of daily returns.
Source: Morningstar, MSCI and AllianceBernstein (AB)

Kent Hargis, PhD| Chief Investment Officer—Strategic Core Equities; Portfolio Manager—Global Low Carbon Strategy
Sammy Suzuki, CFA| Head—Emerging Markets Equities
Christopher W. Marx| Global Head—Equity Business Development

Global stocks rebounded in the first quarter, but the ride was rocky. Even in a rising market, volatility is a clear and present danger. With so many risks clouding the outlook, we believe that investors should focus on generating a smoother pattern of returns.

When equity markets tumbled in late 2018, controlling volatility was a high priority for many investors. But when markets rose in the first three months of 2019, volatility seemed less pressing.

Turbulent Environment Continues

In fact, volatility has persisted this year, even as stocks recovered. The daily volatility of the MSCI ACWI Index was 11%, slightly lower than the 13% recorded during last year’s down market. The index rose or fell by at least 1% in eight days during the quarter. At that rate, we can expect 24 more days of sharp gains or declines through the year-end. We’re clearly in a much more turbulent environment than we were in 2017, when only three days of gains or losses of more than 1% were recorded.

Some indicators tell a different story. The VIX Index, which measures US market volatility, is low. But the VIX captures forward-looking expectations of future short-term realized volatility. It doesn’t reflect the actual volatility that investors have experienced in sharp swings of trading patterns.

Stay Invested Through Volatile Episodes

Big drawdowns can be unsettling for investors. But selling out of equities when the market corrects is often a mistake. Indeed, investors who exited stocks during the late 2018 downturn would have forfeited returns from the rebound in early 2019. Since it’s almost impossible to time inflection points in the market, we believe staying invested through bouts of volatility is essential for success.

Brexit, trade wars, China’s economy and global growth are just some of the risks that may continue to fuel volatility this year. In this environment, we think it’s important to consider investment strategies that can help investors capture good sources of long-term return potential but that are also designed to provide resilience to downturns and deliver a more comfortable investment journey.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein.


About the Authors

Kent Hargis is the Chief Investment Officer of Strategic Core Equities. He created the Strategic Core platform and has been managing the Global, International and US Strategic Core portfolios since their inception in 2011. Hargis has also been Portfolio Manager for the Global Low Carbon Strategy Portfolio since 2022. Previously, he managed the Emerging Portfolio from 2015 through 2023. Hargis was global head of quantitative research for Equities from 2009 through 2014, with responsibility for directing research and the application of risk and return models across the firm’s equity portfolios. He joined AB in 2003 as a senior quantitative strategist. Prior to that, Hargis was chief portfolio strategist for global emerging markets at Goldman Sachs. From 1995 through 1998, he was assistant professor of international finance in the graduate program at the University of South Carolina, where he published extensively on various international investment topics. Hargis holds a PhD in economics from the University of Illinois, where his research focused on international finance, econometrics and emerging financial markets. Location: New York

Sammy Suzuki is Head of Emerging Markets Equities, responsible for overseeing AB’s emerging-markets equity business and instrumental in the formation and shaping of AB’s Emerging Markets Equity platform. He was also a key architect of the Strategic Core platform and has managed the Emerging Markets Portfolio since its inception in 2012, and the Global, International and US portfolios from 2015 to 2023. Suzuki has managed portfolios since 2004. From 2010 to 2012, he also held the role of director of Fundamental Value Research, where he managed 50 fundamental analysts globally. Prior to managing portfolios, Suzuki spent a decade as a research analyst. He joined AB in 1994 as a research associate, first covering the capital equipment industry, followed by the technology and global automotive industries. Before joining the firm, Suzuki was a consultant at Bain & Company. He holds both a BSE (magna cum laude)  in materials engineering from the School of Engineering and Applied Science, and a BS (magna cum laude) in finance from the Wharton School at the University of Pennsylvania. Suzuki is a CFA charterholder and was previously a member of the Board of the CFA Society New York. He currently serves on the Board of the Association of Asian American Investment Managers. Location: New York

Christopher W. Marx is Senior Vice President and Global Head of Equity Business Development. He is responsible for overseeing the firm's team of equity investment strategists and product managers, setting strategic priorities and goals for the global Equities business, developing new products, and engaging with clients to represent market views and investment strategies of the firm. Previously, Marx was a senior investment strategist and a portfolio manager of Equities, and in 2011 he cofounded the Global, International and US Strategic Core Equity portfolios with Kent Hargis. He joined the firm in 1997 as a research analyst covering a variety of industries both domestically and internationally, including chemicals, metals, retail and consumer staples. Marx became part of the portfolio-management team in 2004. Prior to joining the firm, he spent six years as a consultant for Deloitte & Touche and Boston Consulting Group. Marx holds a BA in economics from Harvard University and an MBA from the Stanford Graduate School of Business. Location: New York