Volatility picked up again in the autumn, with movements in oil prices, doubts over monetary policy and questions on global growth continuing to feed nervousness as equity valuations rose without much consideration of macroeconomic fundamental factors.Īs of October, the imminent presidential election in the US added to this nervousness. The rapid designation of Theresa May as prime minister clarified the political situation (though numerous questions remain as to how the forthcoming negotiations will go) and enabled a substantial rebound in equities in July followed by a degree of stabilisation. The major equity indices plummeted on 24 June, before recovering steadily. The UK’s vote to leave the European Union, announced during the night of 23 to 24 June, was a huge shock. In June, the UK referendum was the focus of attention and drove volatility on European markets to the highest level of the year. The rally continued during April and May, albeit showing signs of a slowdown despite a fairly beneficial economic backdrop. Initial discussions between Saudi Arabia and other oil-producing countries were tentative but testified to the will to negotiate and enabled a rapid recovery in oil prices (to around USD 50), which prompted a stock market recovery in February and March. This angst was fed in part by the continuation of the fall in oil prices (to USD 26/barrel in February) prompting a slump in valuations of equities as of January 2016. The year 2016 got off to a bad start in equity markets, with widespread angst over prospects for global growth and in particular the Chinese economy (adjustments in the yuan). After a roller-coaster start - at one point in February 2016, the S&P 500 index fell by 15% - the principal equity markets in developed countries had a good year in 2016 (see Exhibit 1 below).