ETFs under the spotlight amid high correlation

Markets have become less volatile recently, but correlation remains persistently high. Some analysts point the finger at index investing – but that theory has plenty of critics. Whatever the explanation, investors will be hoping it doesn’t take a crash to burst the correlation bubble. Duncan Wood reports

The sugar-fuelled riot that is typical of a child’s party becomes something quite different if the partygoers can be persuaded to play ‘Simon Says’: one of them calls out instructions to the rest, who obediently stand on one leg, turn around, or clap their hands as required. Where there was bedlam, order reigns. Something similar is happening in the world’s biggest equity markets – six-month realised correlation on the S&P 500 index breached the 60% level at the start of June and has remained