Tuesday, February 21, 2012

Volatility's End, or Beginning?

There's no doubt that the stock market has been an exceptionally volatile place over the past few years. How volatile? From 2008 to 2011, there were 100 days in which the S&P 500 index lost 2 percent of its value or more. By contrast, in the 34 years between 1952 and 1986, there were only 83 such days.

Here's another one: There were 19 days between July 27 and December 8 of last year when the S&P had one of those 2 percent drops. That's more days of big losses in less than half a year than there were for the entire period from 1991 to 1997, or from 1975 to 1981.

Those stats were compiled by Conor Sen over at the Minyanville web site. Sen thinks the lesson is that our recently volatility is an outlier, and that we're likely to return to a normal, calm stock market over the next few decades. Of course, we may also be seeing that volatility is the new normal, and we'll never again see the orderliness that characterized the market for the second half of the 20th century. At this point, it's anyone's guess.

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