September 11, 2017

Chart of the Week: Volatility, What Volatility?

by Fathom Consulting

Last month we passed the tenth anniversary of the financial crisis – an event that turned conventional wisdom about how economies operate on its head, and exposed widespread risks in the financial system that had previously gone unchecked. This led to a repricing of risk across the board. While policy uncertainty across major developed countries increased since the financial crisis and subsequent euro sovereign debt crisis, and remains historically high, the same is not true of the standard deviation of stock market returns, or other volatility measures such as the VIX.

The VIX index is a measure of market-implied expectations of near-term volatility calculated using S&P 500 index option prices, and is a closely watched barometer of investor sentiment and market volatility. Not just far below its historical average, the VIX index is currently close to its lowest recorded level. Investors appear remarkably sanguine, despite stretched valuations across many asset classes and considerable political uncertainty in the US and elevated geopolitical tensions. One explanation could be the emergency level of monetary stimulus provided by central banks, or maybe investors simply think this time will be different.

Refresh the chart in your browser Edit chart in Datastream

Want more charts and analysis? Access a pre-built library of charts built by Fathom Consulting via Datastream Chartbook in Thomson Reuters Eikon.

______________________________________________________________________

Thomson Reuters Datastream

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Thomson Reuters offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

Article Keywords , , , , ,

Get In Touch

Subscribe