Volatile Returns

The value of investments can go down as well as up…

The second half of May saw a sudden bout of jitters hit global stock markets. As the graph below shows, until mid-May the major markets had been enjoying a good 2013, with last year’s various concerns (Eurozone, US fiscal cliff, UK deficits, etc) seemingly forgotten.

Then, on 23 May, Japan’s Nikkei 225 plummeted by 7.3%, its biggest one-day fall since the March 2011 earthquake and tsunami. Other markets duly crumbled in Tokyo’s wake, although not to the same extent. The blame for the fallout was mostly pinned on one or both of the following:

Chart of the main global Markets from January-May 2013
Dark Blue: Nikkei 225, Red: S&P 500
Pale Blue: FTSE All Share
Source: Digital Look

Whether either was the true cause, nobody knows: there is always a temptation to pin events to market movements rather than leave them unexplained. In the final week of May – shortened by a Monday holiday in some countries – markets remained volatile. It could all be just ‘noise’. Looked at over the month as a whole, the main US, UK and Japanese indices were virtually unchanged.