- Market volatility in 2018 hit investors accustomed to the calm of 2017
- In fact, 2018 volatility was near the long-term average
- 2019 might feel similar to 2018 as many issues can spark ups and downs
The picture began to change in 2018 when geopolitical risk, monetary policy, trade wars, inflation concerns, and an aging bull market all contributed to the return of normal volatility.
The VIX in perspective: 2017 vs. 2018
- In 2017, the VIX closed under 10 on 52 days
- In 2018, the VIX closed under 10 on 7 days, and all of them were in January
- In 2017, the high close for the VIX was 16.04
- In 2018, the high close was 37.32
- Also in 2018, the VIX had 113 closes higher than the 2017 high
- In 2017, the average VIX close was 11.09
- In 2018, the average VIX close was 16.64
- 2018 had 238 closes above the 2017 average
Daily returns in perspective: 2017 vs. 2018
- 2017 had only 8 daily moves greater than 1% (four were positive and four were negative)
- 2018 had 64 daily moves greater than 1% (32 were positive and 32 were negative)
- 2017 had ZERO daily moves greater than 2%
- 2018 had 20 daily moves greater than 2% (5 were positive and 15 were negative)
2019 could look like 2018
Moving forward into 2019, market volatility will likely persist at current levels, and may even be poised to increase. Three indicators signal this trend.
Historically, volatility tends to trend higher when the yield curve is flatter, and it is nearly flat today:
Volatility also tends to increase when the corporate debt-to-GDP ratio becomes extended:
Last, volatility also often rises when there is more policy uncertainty:
Also, the current environment has a number of issues that can trigger market volatility: jittery investors, the near-decade length of the bull run, trade wars and trade-war rhetoric, a steep drop in the price of oil, and recession fears, to name a few.
For informational purposes only. Not an investment recommendation.
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