The False Stock Market Volatility Narrative

From Tuesday until closing yesterday, the Dow Jones Industrial Average (DJIA) dropped by 1.6%. By high noon today, however, the market is rebounding by 0.8%. This marketplace is not volatile. Nevertheless, hosts across the news media seem to be hyping up the danger, like millenarians praying for the apocalypse. The media argues that Boeing and Fedex have been dragging down the whole market. This is simply not the case, as the market has been — over any reasonable time-frame — absorbing the hits and continuing to grow.

To substantiate my argument that the market is not volatile: consider first, the respected CBOE Volatility Index (VIX), obviously a statistical measure of the spread of stock performance. The Vix is posting 13.5 points today, on March 21st, down from the Christmas Eve peak at 36, right at the beginning of the December panic. (How’s that for a Mr. Grinch?) In fact, our current VIX is the lowest since September 2018, and both numbers, in absolute terms, are quite low.

Further, consider that the business media has tunnel vision. In their obsession with wounded companies like Boeing and Fedex, they lose the forest for the trees. It’s understandable. If it bleeds, it leads. The downside is that the media makes investors more bearish, to the extent they can be intimidated. Still, this does not resolve the sense of drama in the markets.

On the other hand, while it’s true the Fed’s dovishness will calm investors for the short term, there are still projected interest hikes for 2020 and 2021. So, we’re just delaying the terror.

To close, if you think the market is dangerous, you’re exhibiting Freudian projection.

1 Comment
  1. Trent Miller 7 months ago
    Reply

    I suspect tomorrow or Monday $BA is gonna crash through support and take $DJIA with it

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