Sharper day-to-day movements will be unnerving for some investors.
The last fortnight of trading on global share markets has been one of the more volatile periods we have had for some time. The week before last, the Dow Jones index in the US experienced triple-digit swings every day of the week, the longest stretch of such big moves in 16 months.
We haven't seen such large day-to-day moves in a while. Back in 2008 at the height of the financial crisis, we regularly saw moves of 5 or even 10 per cent in a day. But one of the hallmarks of America's massive money printing programme has been much quieter, more stable markets with very low volatility. That's why last week a move of 1.6 per cent, which a few years ago would've been just another day on the trading floor, made headlines.
There are roughly 250 trading days each year and in the last 12 months, there have been just 30 days where we have seen a move of more than 1 per cent in either direction for the US Standard & Poor's 500 index. That equates to just 12 per cent of all trading sessions, so for the vast majority of the time, we awoke to very low volatility with only small day-to-day moves in share prices.
With this flow of market-smoothing liquidity set to finish at the end of this month, I think there is a good chance we will see more trading sessions that look similar to what we've seen in the last two weeks, with probably even bigger moves.