Volatility: The New Normal

RK
by Ryan Kropog147 views·Updated Apr 2, 2020
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THE MONTHLY MINUTE W/ RYAN KROPOG – APRIL 2020 EDITION We recently seen unprecedented stock market volatility, to the downside and to the upside. Is this volatility a byproduct of the moment? Or is it our new normal? In this edition of The Monthly Minute, Ryan Kropog takes a closer look at a market environment that has been re-writing the record books. VISIT US ONLINE: http://www.kropogfinancial.com -- Securities offered through LPL Financial. Member FINRA/SIPC The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. This material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal. All performance referenced is historical and is no guarantee of future results. Sources: • https://www.wsj.com/articles/global-stock-markets-dow-update-3-26-2020-11585196225 • https://markets.businessinsider.com/news/stocks/dow-index-bear-stock-market-20-days-fastest-history-coronavirus-2020-3-1028989775 • https://ycharts.com/indicators/vix_volatility_index LPL Tracking # 1-974328

Audio TranscriptAuto-generated

  1. so we of course we're seeing some extreme volatility in
  2. both the global stock and bond markets.
  3. But let's take a closer look at the data to
  4. see what we can work now.
  5. Volatility in United States stock market is often measured by
  6. the volatility index or the vics, and the vics is
  7. a barometer for how fearful and uncertain the markets currently
  8. are. If you can see from this chart, the latest
  9. vics reading comes in at 66 well above the long
  10. term average of 18.
  11. Furthermore, the recent market volatility twice prompted a 15 minute
  12. trading halt within minutes of the markets open.
  13. The first such pauses his 2008.
  14. But not only are we seeing extreme intraday volatility in
  15. stocks, we were also seeing record breaking market movements in
  16. each direction.
  17. The Dow Jones recently tumbled 20% in just 19 trading
  18. days, a new record for the index.
  19. However, that bear market ended after just 12 days is
  20. a Dow then rose 20% over the next three trading
  21. sessions, technically bringing the index back into a bull market
  22. territory. The 11 day bear market was the shortest in
  23. record for the Dow and the three days rise back
  24. into bull market territory was also the fastest in history,
  25. So we're seeing extreme intraday market volatility and record breaking
  26. movements in each direction.
  27. Now this is a course partly a sign of the
  28. times is pointed out by this chart here showing unemployment
  29. claims today versus the last recession.
  30. However, these fast and swift market swings may just be
  31. our new normal data moves quickly online via social media
  32. and push notifications.
  33. Journalists now have Twitter to release news bits in real
  34. time. An improved technology means high frequency large orders in
  35. the stock and bond markets and take place on a
  36. daily basis.
  37. Now, in some respects, it's good that people can obtain
  38. and digest data in real time and therefore make decisions
  39. more quickly.
  40. However, the constant barrage of news can lead to emotional
  41. and immediate reactions, often to the detriment of investors.
  42. Either way, it's important for investors to understand that swift
  43. and drastic market movements likely be our new reality when
  44. it comes to only stocks.
  45. It is therefore, more important than ever to be honest
  46. with yourself about your risk tolerance and to work with
  47. the C f P professional to develop a plan that
  48. weighs out your time horizon and factors in your tolerance
  49. for risk