Charts of the Week
Volatility Index
Chart of the Week for November 2, 2018 - November 8, 2018
The Chicago Board Options Exchange ("CBOE") Volatility Index ("VIX") is a key measure of investor expectations for equity market volatility risk over the forward 30-day period. It is considered a good barometer of investor sentiment and is often referred to as the "fear" index. A high VIX level is generally associated with a period of increased volatility and uncertainty in the market, while a lower level corresponds to less volatility and less stress in the market.
The VIX can change dramatically as investor concerns change as noted in the chart above covering the period of October 31, 2017 through October 31, 2018. Volatility increased markedly in October 2018, with an intra-month closing high of 25.2 for the VIX. The October high was still well below the peak VIX closing value for period of 37.3 on February 5, 2018. Market strategists note that while underlying U.S. economic conditions continue to be strong, factors including rising U.S. interest rates and concerns about U.S. Trade Policy contributed to both volatility spikes during the year. The upcoming U.S. mid-term elections were another factor adding to the recent volatility.
Spikes in volatility cannot be predicted and fear of volatility or continued volatility without a long-term plan may lead to imprudent decision making. Prudent investors should base decisions on their own circumstances taking into consideration their goals, investment experience, time horizon and risk tolerance and not just the latest movement in the market.
Posted by: sarah_oz@yahoo.com
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