The Surest Bet in all of Finance
Our “sure bet” thesis on market volatility is running full-steam right now.
To recap our thesis, we know there are few sure bets in the financial markets… few “this is the case, and it always will be” statements we’re comfortable making. The market is just too messy for those kinds of words.
But one “this is the case, and always will be” statements we’ll stick by is, “Calm periods of rosy headlines and softly rising prices will always be #-ad_banner-#interrupted by periods of wrenching volatility… and vice versa.” That’s just the way the world operates.
For a picture of this “always the case, always will be” phenomenon at work, we present the past five years of the Volatility Index (the “VIX“), the most popular gauge of market volatility and investor fear. When the VIX is low (below 18), it indicates investors have few worries and see blue skies ahead. When the VIX is high (above 35), it indicates panic and confusion.
The last time we updated you on this idea, the Japanese earthquake had budged the market and its volatility readings a bit. Things quickly calmed down. But the past few weeks have brought incredible market declines and a soaring VIX. This fear gauge just popped to its highest level since the 2010 “flash crash.” The surest bet in finance works again.