Daily Market Volatility

From Bespoke Investment Group:

"If the hour to hour up and down moves from the market in reaction to headlines coming out of Washington have you frustrated, just remember that it could be a lot worse.  The chart below shows the S&P 500's absolute average daily percentage move over a 50 trading day rolling period since 2011.  As a result of the stalemate in Washington, the S&P 500's average daily percentage move has increased from +/-0.43% up to +/-0.55% since mid-September.  

Looking at the chart below, even after the recent uptick in the average daily move of the S&P 500, it is still less than a third of the day to day volatility (+/-1.92%) that we saw back during the 2011 debt ceiling debate.  In fact, it is actually much closer to its lows of the last three years than it is to its highs.  It may be raining now, but it is far from pouring."

My comment:  Volatility has dropped on an absolute and relative basis since the 2008-2009 period.  In fact volatility as measured by the VIX-a popular measure of the implied volatility of S&P 500 index options-has traded at historically low levels in 2013.  This is further evidence that investors still don't believe Washington will allow the US Government to default.  Watch this change though if against all expectations Washington goes off the rails.  

*Long ETFs related to the S&P 500 in client and personal accounts.

Link:  Bespoke Investor Group:  It Could be Worse.