How to profit from volatility and shorter business cycles

STRATEGY

Mark Martin, manager of the Neptune UK Mid Cap fund, explains how to cope with and profit from shorter business cycles and increased volatility.

The CBOE S&P 500 Volatility, or VIX, Index is well-known as a gauge of fear or market volatility. As the chart of the VIX shows below, volatility in financial markets spiked to all-time highs as the financial crisis first hit in 2008 and subsequently has remained elevated as the financial crisis spread from US sub-prime into the eurozone. The Asian crisis, Long-Term Capital Management’s downfall, Russia’s debt default, the spectacular dotcom collapse, 9/11 and the collapse of Enron all pale in comparison to recent years’ events. In parallel with this volatility, recent business cycles ha...