Monday, August 31, 2015

What Does This Volatility Mean?

That was some ride in the stock markets last week, wasn't it? Here's how wild it was: The Dow Jones industrial average went six straight days with moves of at least 200 points. That had never happened before.The S&P 500 had six straight days with 1 percentage moves, which hadn't happened since 2009.

Is there anything we can learn from this? According to the market research firm Convergex, these volatile stretches tend to occur at two distinct points: at the beginning of a bull market, or toward the end of one. For example, there were 82 moves in the S&P of more than 1 percent in 1982, when that bull market was just beginning. That declined to 28 by 1985, then picked back up to 61 in 1986 and 95 in 1987 as the bull ended its run.

We saw similar moves at the beginning of this bull market: There were 118 plus or minus 1 percent moves in 2009, but just 38 in 2014. We're at 40 already in 2015.

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