MICHELLE SMALENBERGER, CFP®
You have likely given more thought to your summer vacation plans this week than to the performance of the financial markets. That’s because this week has been relatively quiet. That means the market has left it to our 4th of July celebrations to provide the fireworks instead of any market headlines!
Investors waiting to hear reports of how the economy and companies are doing can cause anxiousness and therefore more volatility. We have seen intra-day swings in the market of 100 or 200 points up and down recently. When we aren’t being reminded of how weak or strong our economy is we can begin to wonder if things are really as good as they seem. This can lead to more volatility since some investors may begin taking profits ahead of uncertainty. Some may be using this time to rotate in and out of sectors that have traded more or less favorably.
There is an index that tracks market volatility which is known as the VIX. As seen below, you’ll notice how this has changed over the years. The large spike in 2008-2009 is due to the Financial Crisis. This helps to provide a reference for the 10-year lows we are seeing in the volatility index today.
As a reminder, investing in the market does bring risk. And the VIX can help to show how investors “feel” about the risk they are assuming as they desire their portfolios to grow.
Even when volatile days come and go, it is important to stay disciplined with your diversified portfolio. Perhaps, like the lack of economic reports in the news this week, you are unplugging and enjoying some time away from work while this beautiful summer weather is here.
We wish you a happy and safe Independence Day!