Comments from Russ Koesterich, CFA, Chief Investment Strategist for BlackRock

Says there are at least two signs pointing to higher volatility ahead for stocks:

Slowing global growth

  • Estimates for 2015 growth by the G8 countries have fallen from more than 2 percent last fall to 1.7 percent today

Less benign credit conditions

  • Bond yields are once again falling ... Investors are reacting to signs of slowing global growth, plunging commodity prices and more modest inflation expectations
  • Other key trend in the bond markets is widening credit spreads, or the difference between the yields of U.S. Treasuries and credit instruments of comparable maturity
  • U.S high yield spreads have expanded by roughly 150 basis points over the past year, from around 360 last August to about 510 today

On stock market volatility:

  • Last week the VIX Index, ... traded back down to 12, roughly 40 percent below its long-term average
  • This implies equity investors may be too complacent
  • Should volatility rise and equities correct, one area of the market is particularly at risk: the popular "momentum" trade (in other words, stocks or sectors exhibiting strong price gains recently). If volatility heats up, so-called momentums stocks, which have rallied strongly this year, could falter.