Page 10 - ISQ UK_October 2017

INVESTMENT STRATEGY QUARTERLY

Low Volatility:

All Quiet on the Market Front? (cont.)

error and emotion, thus decreasing the impact of these traditional most pronounced in the technology space, the willingness of
(and sometimes irrational) forces behind market fluctuations. investors to put cash to work during minor drawdowns in the market
has helped stabilize and limit some downside that the market would
Another school of thought claims that the growth of passive investing otherwise have experienced.
has reduced the volume of trades by ‘stock-pickers’ driven by
fundamental analysis, contributing to increased correlations MARKET FUNDAMENTALS
between securities across the board. However, given that intra-stock Despite the fear that markets are overvalued and a pullback or
correlations are now at their lowest levels since the Great Recession, correction is inevitable, we can’t ignore the general health of the
this theory may warrant additional scrutiny. equity markets. Healthy earnings growth, positive economic growth,
and an extended period of low interest rates have fuelled the
TECHNOLOGY STOCKS uptrend in prices for quite some time. Positive earnings estimates
It should come as no surprise that technology stocks have been one going forward are also supportive of further appreciation.
of the key drivers of recent U.S. market performance – earning over
1
27% so far this year. Amongst other areas of the market, investors While equity prices certainly are not cheap at the moment, the
are treating price declines in this sector as investing opportunities, markets seem to have experienced some structural changes that
buying the dips before any negative impact is felt. While it has been should be considered when assessing valuations. For instance,

S&P 500 INFO TECH SECTOR PERFORMANCE

$130
“While it has been most
pronounced in the technology
$125
space, the willingness of
investors to put cash to work
Growth of $100 $115 TECHNOLOGY during minor draw-downs in
$120
the market
has helped stabilise
STOCKS
$110
27% and limit some down-side that
the market would otherwise
$105 have experienced.”
YEAR TO DATE

$100 Jan 17 Feb 17 Mar 17 Apr 17 July 17 Aug 17

Source: S&P 500 Info Tech Sector Index May 17 June 17 Sept 17
The chart is not indicative of any individual security's performance. The S&P 500® Information Technology Index comprises those companies
included in the S&P 500 that are classified as members of the GICS® information technology sector. The index is unmanaged and cannot
be invested in directly. The companies engaged in the technology industry are subject to fierce competition and their products and services
may be subject to rapid obsolescence. Past performance may not be indicative of future results. There is no assurance these trends will
continue. The market value of securities fluctuates and you may incur a profit or a loss. This analysis does not include transaction costs
which would reduce an investor's return.

9 1 Performance as of 9/30/2017.