Market Volatility

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:

The VIX over time  (http://quotes.wsj.com/VIX/index-interactive-chart)

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...

Nathan Yates

Forward View Consulting, 288 Crack Rock Road, Clintwood, VA 24228, USA

Nathan Yates has been fascinated by technology and finance since he was young. He was the kid devouring the business section of the newspaper (remember those?) while others read everything else. Nathan believes that the American economy is built from the bottom-up, meaning that small businesses and local nonprofits are the foundation of our nation's success. These organizations are the lifeblood of towns and cities across the U.S. Unfortunately, most consulting firms overlook companies or organizations that don't have eight-figure budgets. Nathan thought Forward View Consulting should be different. And we are. As Lead Consultant, Nathan works with each client to deliver only the best financial and/or website development services. Nathan's years of web design experience and his business degrees ensure that professional expertise is brought to each project. Our network of contacts can offer additional specialized guidance if needed. Before creating Forward View Consulting, Nathan worked for an independent equity research firm as a Research Associate covering the industrial and energy sectors. This work involved preparing quarterly 15-40 page reports on multi-billion dollar corporations along with timely analysis of M&A activity and industry-wide news. He also managed research distribution and the company's online presence. Nathan also spent a summer serving as a local financial adviser's Research Intern. Nathan earned a Bachelor's degree in Economics and Finance from Southern New Hampshire University, graduating summa cum laude. He then earned a Master's degree in Finance from Southern New Hampshire University, where he was named the Outstanding Student in his particular concentration. Now, Nathan is an adjunct professor teaching economics and finance for his alma mater. In his spare time, Nathan enjoys fishing, reading, time with family and serving as a volunteer webmaster for the Clintwood United Methodist Church.