2014.06.1000:06:58UTC+00Investor confidence up as volatility sinks

Helped largely by the policies of several major central banks, volatility in many world markets have been going down to historic lows resulting in strong investor confidence that has some advising caution.

Yesterday, the FTSE All World index, a gauge for measuring the world’s top stocks, provided an example of how overall markets have been forming recently by breaking into record high territory and is looking set for yet another record being up 0.2% to 281.48 during late London market hours. The performance of the FTSE All World and other similar indexes in Europe, the US, and Asia, in turn, were pushed by markets for currencies, bonds, equities, and oil having volatility index levels not seen in nearly a decade.

The index covering volatility in the world’s currencies sank to its lowest point ever since 2001 when it began, and oil is in a similar condition at its lowest in almost 7 years. Furthermore, these were punctuated by Wall Street’s Vix index, popularly called the fear gauge, for US stocks which lingered around its lowest mark in seven years on Monday. Even bank regulations, which has recently become stricter, have contributed to these low levels by raising trading costs and making hedge fund managers apprehensive.

A prime mover of this trend are the unconventional measures unveiled last week by the European Central Bank which included putting interest rates into the negative for the first time in the eurozone. With rates as low as they can reasonably go and not looking to increase anytime soon, investors have treated it as a green light for trading especially with central banks looking keen to address volatility every time it threatens to rise.

Analysts warn, however, that not everything is as rosy as it seems based on a similar period in 2007 that occurred right before the financial crisis where volatility significantly spiked up.