Friday, February 20, 2015

A Welcome Cooling of the Markets

After a very quiet 2014, the stock market's volatility levels shot upward in January, because of a dangerous mix of falling oil prices, a rising U.S. dollar, and disappointing corporate earnings. But February has brought a welcome cooling.

The CBOE Volatility Index, or VIX, hit a high of 23 in January, after spending most of 2014 under 20. But in the first couple weeks of February, it has fallen to 15, not coincidentally as the S&P 500 has recovered its footing. The VIX is now at its lowest level in about two months, although it's still slightly elevated, about 5 percent above its 200-day norm.


One odd thing about this: The U.S. markets have been cooling off while the rest of the world has been getting more volatile. The CBOE's Oil ETF Volatility Index remains 88 percent higher than its 200-day average, and the CBOE/CME FX Euro Volatility is 44 percent higher than its 200-day average.

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