Equity market volatility has picked up significantly in recent weeks. This may reflect increased investor concern about the outlook for growth and interest rates as well as a feeling that uncertainty in general is on the rise. This is not without importance for the economy: increased volatility may weigh on corporate investment because of increased uncertainty and/or higher costs of financing. Households, feeling more uncertain, may scale back their consumption. Historically there is a clear relationship: higher volatility in the recent past has been a leading indicator of slower growth.

William de Vijlder


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