Volatility Falls to Seven-Year Low

For all the problems on Wall Street, in Washington and around the world, the stock market has been quite calm recently. This last quarter was the least volatile in seven years.

The average daily change for the Standard & Poor’s 500 Index narrowed to 0.45 percent in the third quarter, the smallest since the end of 2006, data compiled by Bloomberg show. The Chicago Board Options Exchange Volatility Index slid 8.3 percent since June 28, a retreat that coincided with a 5.3 percent advance in the S&P 500 and a 39 percent windfall for investors who used an exchange-traded note that bets against equity swings.

U.S. stock fluctuations are narrowing as investors become more confident that the four-year bull market is sustainable, corporate profits top all-time highs and growth in China and Europe show signs of strengthening. The Fed this month refrained from slowing its monthly bond buying, saying it needs more evidence of an improvement in the American labor market.

“Toward the end of August everyone was geared up for the first tapering from the Fed and a market sell-off, but it didn’t happen,” Justin Golden, a partner at Lake Hill Capital Management LLC, said via phone on Sept. 27. The New York-based hedge fund trades options on equity indexes and commodities. “People think the markets are pretty smooth sailing for the next few months.”

Here’s a look at the daily changes in the S&P 500 going back a few years. You can see just how erratic things were during the financial crisis, and again during the great freakout of 2011.

fredgraph10022013

From 2008 through 2010, the S&P 500 rose 1.5% or more 103 times. It’s happened just once this year, on the first trading day of the year.

Posted by on October 2nd, 2013 at 9:03 am


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