Volatility in the financial markets has occasionally been dubbed "The New Normal" (or something similarly frightful) by the business media. This type of declaration typically occurs at the peak of a cycle of volatility, thus implying that the writers and pundits are behind the curve. The most important word in that last sentence, though, is "cycle." Volatility, like asset prices, is cyclical. For a visual of equity market volatility as calculated by the VIX index, see:
Notice that the chart above also layers in news stories written about the VIX. Two of the sharpest VIX peaks were preceded by a spike in VIX-related articles. We'd argue that the 2008-09 VIX run-up wasn't covered significantly by the media for two reasons: 1. The VIX wasn't as widely known 5-6 years ago. 2. Other topics, including Lehman Brothers, unemployment, Fed bailouts and the presidential race pulled journalists in other directions.
The critical point here is that we've had over two years of low equity market volatility. While the VIX has jumped off its low, we're not even close to spooky levels. Based on the already declining level of VIX-related articles, you might expect that the cyclical peak has already passed. We're not ready to make that statement just yet, but December "window dressing" among investment funds and traders will likely keep a lid on end-of-year volatility unless we have an exogenous event (terror attack, war, natural disaster etc.). January's market could be more erratic, though, as earnings season begins anew, 2015 guidance is released and everyone on Wall Street returns to work. Stay tuned...