Traders Are Bracing For Volatility
SAQIB IQBAL AHMED
BusinessInsider.com
Jan. 11, 2015
NEW YORK (Reuters) – In the last month, the U.S. stock market is down just 0.8 percent, but it’s been a bumpy ride: Since Dec. 9, the S&P 500 has had a 4 percent selloff, a 6 percent rally, and a 4 percent drop that ended Thursday with a two-day gain of 3 percent. Equities were hit hard again Friday – down almost 1 percent.
Investors made queasy by the sharp selloffs and snapback rallies might want to prepare themselves for more of the same. A growing number of market watchers say the low-volatility regime that dominated in 2013 and 2014 has ended, and the roller-coaster ride going on now has become the norm.
“This year has the potential to be a very good year for stocks but we will see more and bigger spikes in volatility,” said Brian Reynolds, chief market strategist at Rosenblatt Securities in New York.
Uncertainty about impending Greek elections, rising credit spreads, the possibility of a Russian default, and how far oil prices could fall is boosting the CBOE Volatility Index <.VIX>, the market’s favored indicator of Wall Street’s anxiety. For example, stock investors have attempted to buy up energy shares cheap, only to be hit hard when oil keeps falling, Reynolds said. The VIX is a measure of how high investors perceive the risk or uncertainty about the size of changes in a security’s value.
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