RWC Partners: Why volatility in equity markets is so low - and why it makes us very cautious

Reasons to remain cautious

RWC Partners' John Teahan, co-manager of the RWC Enhanced Income fund alongside Ian Lance and Nick Purves, warns the era of low volatility and record valuations across major equity markets means investors should be much more cautious than they are.

Many investors, including ourselves, are now starting to wonder what is keeping equity market volatility so low. Volatility today is low; such levels have only been experienced a few times over previous decades, and each time have been accompanied by a similar prolonged period of strength for equity markets. So what is keeping volatility down this time around, and why should investors care? Rising equity markets and relatively relaxed investors Prolonged high equity returns are accompanied by, and require, lower volatility. Of course, volatility can remain subdued for long period...