While volatility and the VIX, the Chicago Board of Options Exchange’s (CBOE) ticker symbol that tracks market volatility, dropped below 20 last week, we are again seeing higher volatility in the way of continued downward stock market fluctuation with the Vix now at 21.49. In contrast, the VIX saw its 10 year low on 11/24/17 at 8.56, yet rose to 50.3 in February 2018. The VIX is up 84% int he last 30 days, consistent with the spike in investor anxiety in October. This is why the VIX is referred to as the fear gauge.
As we have often discussed in our market updates, volatility may feel uncomfortable, but market fluctuations are normal. That perspective becomes especially relevant in October, which is considered the most volatile month for markets.
Examining October History
Historical performance can’t predict future results. However, we do believe that understanding what makes October unique can help provide context for the current environment.
Significant market events
For generations, many of the most significant market events have taken place in October, including the crash of 1929 and multiple large drops in 2008. In addition, last Friday, October 19, marked the 31st anniversary of the “Bloody Monday” market crash. On that date in 1987, the S&P 500 lost over 20% of its value.
Higher than normal volatility
Since 1950, the S&P 500 has experienced more 1% moves in October than any other month. The month has also been the Dow’s most volatile since its beginning in 1896.
Despite the large events and high volatility that October can bring, its results may be stronger than expected. For the past 20 years, October has had the strongest performance of any month.
Exactly how this month will end remains to be seen, as we still have a few trading days left. But we hope that understanding how much markets often move in October will help you ride out any future volatility with more confidence. If your “fear gauge” is also high, a conversation with your advisor could offer some peace and serve as a way to quiet the current media and market noise; all market volatility is not noise, but the current strength of underlying fundamentals don’t suggest buying into the idea of a market recession or the end of the Bull Market.
Of course, we’re also here to provide any answers or information you need, so contact us any time; 1-855-GOALPHA, or reply here with your comments.