That gloomy warning comes just as many investors are trying to reverse the losses suffered in the Year of the Rabbit. Last year, Leu accurately forecast that the Straits Times Index would end the year in negative territory — it fell 17% over the calendar year. This year will bring no respite and he sees the benchmark index continuing on a downward bias, trapped for the most part between 2,000 and 2,500 points.

 

In particular, the property sector is likely to falter. As efforts by the government to cool the overheated residential housing market start to bite, Leu says the URA property price index could fall by 15% to 17%. While this will mean a squeeze in profit for those offloading homes, it represents a window of opportunity for those looking to buy property. He advocates purchasing residential property before 2012 draws to an end as “things would really start picking up” from 2013.

 

Another industry that may take a hit this year is transport, specifically the air travel and shipping sectors. This is because “we may see more accidents and disasters in these areas”, says Leu. For instance, countries in the east and northeast should brace themselves for more earthquakes. The northeast region should also expect flooding. Meanwhile, gold and other metals could see high volatility in trading and pricing, leading to an atmosphere of “shock and panic”.

 

Volatility is a word that has been coming up a lot recently. It has been used to describe daily gyrations in Singapore stocks, the nation’s q-o-q output, the job market and hard-to-predict events on the global stage, such as the Arab Spring and the eurozone crisis. It seems volatility has reached unprecedented levels.

 

Yet, whether volatility has in fact increased for investors in equity markets is arguable. It may have been the case in Europe last year, but in the US, data shows that market volatility has actually been declining compared with the late 1990s, during the dotcom bubble. The “illusion of high volatility is at least in part a function of investor frustration with market returns”, wrote investment guru Bernie Schaeffer in Barron’s recently. In other words, people choose to view price movements through the lens of volatility to justify the outcomes they receive.

 

This resonates all the more when investors’ risk appetites have shrunk. Market pundits note that risk aversion is currently so high that many investors feel they are better off sitting on their hard-earned cash. However, instead of watching from the sidelines and then trying to catch the market on each rebound — the STI is up 7.7% YTD, for instance — perhaps the approach to take in these times is by investing in volatility.