Global volatility has ticked up in recent weeks but some of the turmoil in global markets was calmed towards the end of last week following gains in the information technology and health care sectors in the United States.
Renewed threats this week by the Trump administration in relation to tariffs imposed on Chinese goods reversed this trend.
The S&P 500 fell with declines across the big technology stocks Amazon, Apple and Microsoft.
Concerns relating to the impact on energy prices that had developed as a result of Hurricane Florence diminished given the lower than expected wind velocity.
Another positive in our own part of the world saw employment growth come in above market expectations with the overall unemployment rate unchanged 5.3 per cent.
Concerns relating to a trade war have seen big and consistent falls on the Chinese share market.
I would caution that this market should not be seen as a proxy for the Chinese economy but the Shanghai Composite had its lowest close since 2014 on Monday.
The uptick in volatility this year comes after 18 months of exceptionally benign market conditions.
It is interesting to reflect that this week marks the 10 year Anniversary of the depths of the Global Financial Crisis, which saw the collapse of bank Lehman Brothers.
Volatility during this period was extreme and I would argue that the movements we are seeing at the moment are not only extremely mild but part of a healthy market cycle.
Last week we reported that the Australian reporting season had been reasonably solid.
One stock that has slightly disappointed was the Janus Henderson group.
Last week we reported that the Australian reporting season had been reasonably solid.
This business, which is a global funds management business, is listed both in Australia and the US and has been a favourite of mine.
The stock has been impacted by a lack of investment inflows, significant changes to senior management and weak performances in the asset classes they manage.
Much of this has been priced into the stock with the share price now trading on an undemanding multiple.
The change from a co – CEO to a single CEO structure and the resignation of the global head of distribution have been negative.
Also, many of the synergies that where expected from the merger of the Janus and Henderson Groups have been captured.
For the company to re-rate we would need to see an improvement in the investment performance of the underlying funds they manage, which would hopefully stem fund redemptions and bolster their funds under management.
One company that delivered a very solid result during reporting season but whose share price has suffered due to the regulatory environment is Origin Energy.
Origin produced a result that saw group revenue up 6pc $14 604 million.
There were good improvements in both the Energy markets and Integrated gas components of the business.
Despite this the stock will continue to be impacted by the uncertainty surrounding the regulatory environment also there are escalating cost pressures in the retail energy market and lower gas margins.
Whilst these issues will likely pressure stock price performance, as with Janus Henderson, the undemanding share price offers valuation appeal.
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited is owned by National Australia Bank Limited.
