Thursday, October 16, 2014

The Return of Volatility

The five-year bull run of the stock market has been notable for its relatively low volatility, but it appears as if we're getting back to a rough ride. The S&P 500 index has already moved by 1 percent or more on seven trading days in October. That follows just one such trading day in each of August and September. And there were so much days in either May or June.

The more sophisticated metrics are showing the same effect. The CBOE Volatility Index, commonly known as the VIX, rose by 25 percent on Wednesday to 28.53. That's its highest close since December 2011.

The long-run average for the VIX is 20, which means this market is now well above average on volatility. If it appears even more volatile than normal, that might be because it's been so low in recent months. In July, the VIX got down near 10, a multiyear low-water mark.

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