Volatility is essentially the up and down movement of the market. It measures how quickly or slowly prices change. It also refers to the amount of risk or uncertainty associated with the changes in the value of a security. High volatility means that the price of the security can change radically in a short period of time. Low volatility means that the value is less likely to increase or decrease dramatically, but rather, remain at a steady level.
Drops in the market have a strong association with consumer certainty and confidence. Events such as the downturn in China or the European debt crises impact the market as investors fear the uncertainty such events create. This fear can then cause irrational responses which can result in or exacerbate investor losses. Moving forward, Brexit is likely to be a major source of volatility within the market as the UK negotiates the terms of their leaving the EU.
Whilst concerns about China, the trajectory of the global economy and unconventional monetary policies persist, so too will elevated market volatility.