Stock market volatility has fallen to multi-year lows?
“Merrily, we roll along, roll along.”
Those Stephen Sondheim lyrics pretty much summarize the sentiment among a growing number of investors these days. Consider that the VIX—Wall Street’s so-called fear index—has plummeted in recent weeks to levels not seen before the volatility spike in the pandemic.
That’s true for the popular VIX index (which measures the S&P 500’s expected volatility for the next 30 days) and the lesser-known VIX1Y (which looks out one year). The VIX, for example, currently rests at just 12.9—down from 26 back in March of this year, as seen in the chart.
The upshot: Equity investors are behaving as if they see very little turbulence ahead in the short and longer term compared to the last few years. Some of the key factors keeping a lid on expected volatility include:
- Many investors have maintained a lower-than-average exposure to stocks so far this year, which means their attention is likely less focused on taking steps to manage stock market volatility.
- The surprising resilience of the economy, the job market, and the banking sector has eased fears of an impending recession. In addition, July has historically been the least volatile month of the year1—another reason why we believe the next few weeks could potentially be smooth for investors. As we’ve noted before, calm waters can potentially have positive implications for portfolios.
Regardless, we will continue to watch the VIX and related volatility measures closely for real-time investor sentiment readings and adjust the portfolios if necessary.
Disclosures
This commentary is written by Horizon Investments’ asset management team.
Past performance is not indicative of future results.
1 Source: Reuters, 06/20/23, New US Home Construction Surges by Most in Three Decades in May
Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.
The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money.
Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation.
This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.
Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. An index’s composition may not reflect how a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Individuals cannot invest directly in any index.
Other disclosure information is available at www.horizoninvestments.com.
Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC
©2023 Horizon Investments LLC
