S&P 500 Actual Volatility Hits 70 Year High, Over Half the Trading Days Move At Least 1%

Posted by: Howard Silverblatt on March 19, 2008

S&P 500 volatility as measured by daily changes of at least 1% have soared since last summer’s credit issues emerged as a critical issue, and now stands at a 70 year high. Since the bear-market turnaround in 2002, the number of significant daily market moves has gone down from 49.6% to 11.6% in 2006, and was 12.9% for the first half of 2007. Then, with the emergence of the credit uncertainty, market volatility shot up to 38.6% for the second half of 2007 and now stands at 51.9% for 2008 - a level not seen since 1938.

While the current uncertainty over credit and economic policies is at the heart of the market uncertainty, the upcoming earnings season appears poised to add to the volatility. Earning estimates are unusually wide, given how close to the quarter end we are. By now we typically see a street consensus emerge on the company level, with only a handful of outliers. However, the estimates remain wide apart, which means that there are going to be a significant number of surprises out there, which will translate into additional buying and selling pressure.

Reader Comments

Eric

March 31, 2008 3:33 AM

This level of volatility is a testament to how far and fast US consumer confidence has fallen. Having depression era volatility in this era does not bode well for the economy...

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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