Blog Single Post

Along with the return of many investment professionals from their summer vacations, market volatility has also returned.  Before Friday, 9/9/16 the broad stock market had not dropped by more than 1% for 52 consecutive trading sessions.  However, on 9/9/16 the Dow Jones Industrial Average (DJIA) fell over 394 points, which is over 2%.  The next trading day, Monday, 9/12/16 the DJIA rose 239 points!  As I write this on Tuesday, 9/13/16 the DJIA is down another 276 points!  Should we be concerned with these huge point swings?  Do they mean we should be fearful of the markets again?  I don’t think so.

One of the main indicators of fear in the market is the CBOE Volatility Index, also called the VIX.  The VIX measures investors’ expectations for volatility in stocks.  This index was trading near multiyear lows in July and August.  This is because there appear to be some bright spots in both the world economy and the geopolitical situation.  The vote to have Great Britain leave the European Union (also known as Brexit) was forgotten by most investors soon after it was announced.  Several emerging market countries are showing strong growth this year.  While the political situation in the U.S. and the rest of the world remains uncertain, slow progress is being made in that arena.  The month of September is historically the worst performing month in the stock market.  So it does not surprise me that market swings have returned again.  But does this mean that we should be fearful of the markets again?  As I wrote above, I don’t think so.