Keep your cool during volatility spike

Rising US Treasury yields were just the excuse money men needed to bank massive profits made since Donald Trump's election victory. However, just as markets cannot keep rising forever, they must also stop falling at some point, but it's still unclear whether we've reached a level where buyers see value again.

Futures prices had indicated a much brighter start for global markets, but early gains were wiped out in Asia and Europe looked vulnerable, although indices there remain sharply higher Wednesday. Volatility is back, and investors had better get used to it.

While there's certainly a case to be made against high valuations, especially in the US, there are lots of decent cheap stocks around. Plenty of investors are itching to bet that concerns about inflation and bond yields are overdone and that any increase in either will be much slower than expected.

If that's the case, a 10% correction in the US looks more like a healthy retracement rather than reason to hit the panic button. Long term investors will be amused by it all and are either choosing to ignore the noise or pick up stock at prices not seen for two months in the US and over a year in London.

There are stark similarities between this sell-off and crashes both in August 2015 and in early 2016 when market volatility reached similarly extreme levels.

It took several trading sessions played out over weeks to find a bottom, and it's likely the same will happen here. Only difference this time is that it's the tune of US economic data, not China's currency devaluation that markets are dancing to.

Income seekers bought into cyclical mining shares in early trade following a surge in annual post-tax profit at Rio Tinto to $8.6 billion. These are great results from Rio and underpin confidence in the significant dividend.

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