Volatility has returned to the U.S. equity markets, largely attributed to a more hawkish Federal Reserve, inflation and supply-chain concerns, and the unknowns surrounding the omicron variant of COVID.
The Cboe Volatility Index (VIX) spiked to over 30 last week, the highest level since January 2021. As we have seen in recent weeks, volatility often cuts both ways—to the upside and downside. Many studies have shown how the “best” and “worst” days in the market often cluster together.
Source: Cboe, data through 12/4/2021
Barron’s commented on the market’s volatility and headwinds this past weekend:
An article by Bloomberg appearing in The Washington Post also noted that last week’s jobs report—while disappointing in its top-line jobs growth—may also encourage a now seemingly more hawkish Federal Reserve:
Note: Shaded areas represent recessions.
Source: U.S. Bureau of Labor Statistics
Note: Data through November 2021.
Sources: Trading Economics, U.S. Bureau of Labor Statistics
Circling back to the market’s volatility, and the clustering of “best” and “worst” market days, Bloomberg recently issued an interesting chart showing how 2021’s market action in the S&P 500 has been characterized by enthusiastic “dip buying.”