Stat about Wall Street’s ‘fear gauge’ sums up new era of volatility

Investing & Retiring


Of course, we’re coming off historically low levels, but that says a lot about what market watchers are calling a relatively new era of volatility after such a long period of historically quiet market moves.

“The anomaly that we saw in 2016 and 2017 was the really low VIX. So the tail-risk event, or the black swan event, was a slow-motion car crash of 2017, where we saw the VIX trading at 9,” said Davitt. “So moving out of that extremely left-tail, low vol event into what is a more normal market is going to feel like the market has suddenly become significantly more volatile.”

Davitt recommended that investors generally should stay away from incorporating leverage into their portfolios. He pointed specifically to the demise of a short volatility product, the XIV, which lost 80 percent in early February when the VIX shot higher.

Other strategists have pointed out that volatility has picked up across other asset classes, as well.

“We are seeing a pickup in volatility in the Treasury market, and in the currency market,” said Matt Maley, equity strategist at Miller Tabak, adding that when that kind of volatility gains momentum, it usually bleeds over in the stock market eventually.



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