If you don’t like volatility – in politics, the economy, or life in general – 2020 is not the year for you. Surprisingly, though, recent volatility in the stock market has been decreasing.
Volatility is generally measured by the VIX index, which uses real-time S&P 500 index bid/ask quotes. As you might imagine, the VIX spiked in March of this year, but since then has mostly been trending downward. That high of 82 nearly doubled any previous high for the index. Currently, it sits near 25, 8 points above its 5-year average, but is still considered almost boring compared to the year we’ve had.
Bets on any new increase in volatility have waned. The forward curve for the VIX is essentially flat, showing markets expect volatility to remain where it is now well into next year. That may simply be because it is hard to imagine anything more unpredictable than what 2020 has already thrown our way. Consider the first time you took off in an airplane, with nerves and awe, versus taking off after 100 flights – ho hum, let’s ignore the safety briefing. It seems the stock market has become ho hum about sitting at a volatility level that would usually be considered high (the VIX high for all of 2019 was 25.45).
So here we sit, with the VIX cruising at an altitude of 25 – the “new normal,” at least for now. What does it all mean? For the long-term investor, it likely means turn off your screen and go do something else. But it can also mean opportunities to buy into something you would like to hold for several years. Some areas that look interesting are technology and certain Real Estate Investment Trusts (REITs). Give us a call if you would like to discuss. And keep your seatbelts fastened!
This information is not intended to be used as the only basis for investment decisions, nor should it be construed as advice designed to meet your particular needs. You are advised to seek the advice of your financial adviser, legal or tax professional, prior to making any investment decision based on any specific information contained herein. Copyright Cooper Capital, Inc. 2020
