VOLATILITY IS NOT BAD AND IS NOT NEW

A blog post from Traditions Wealth Advisors

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(Raymond James, 4/11/18) the US U.S. equity markets soared to record highs at the end of January only to reverse course into a freefall over the next several days. The remainder of the first quarter was choppy as investors grappled with increased uncertainty following an extended period of steady gains against a quiet market backdrop.  But, in fact, individual investors remained relatively calm throughout the quarter as lingering memories of the 2008 financial crisis and subsequent recovery had them thinking twice about hastily exiting the market. Backed by a healthy global economy and increasing revenues and earnings expectations for U.S. companies, the noise of the headlines seemed to be just that. Noise.
(Pimco 4/12/18) Volatility: Back to the Future
Volatility is back and capturing headlines in 2018. But is it a sea of change or simply a return to normalcy after years of relative market calm and a particularly tranquil 2017? In March, a combination of risks around rising inflation fears and a global trade war contributed to another bout of equity market swings: The VIX, a measure of U.S. equity market implied volatility, has hovered above 15 on all but one day since February 1, well above last year’s average level of 11. However, looking at volatility from a different perspective – daily returns – the chart shows that volatility in the first quarter of 2018 is closely aligned with that experienced over the past 20 years. It appears 2017 is the anomaly and 1Q 2018 much more the norm.