Increased Volatility
What is it?
Recently, the markets have been more volatile. Some investing strategies compare added volatility to risk in the markets. When markets are more volatile, there may be an added risk or reward of larger moves in the markets.
Last Monday, volatility peaked over 30. That is shown by the candle wick breaking through the line at 30 in March 2023. The chart shows how Volatility of the S&P 500 (VIX) has changed over the last year using a candlestick to represent the price action of each day.
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Why does it matter?
Hedgeye Risk Management is an investment research firm that we subscribe to. They believe that a measure of 30 or more is a significant amount of volatility.** When volatility is high, Hedgeye advises investors to manage investments differently. Markets tend to avoid risk more when volatility is at that mark than when volatility is lower. It has been a few months since volatility has reached 30 or more. Many risky investments are being sold off as volatility rises, and funds are being moved to investments that are considered more stable.
There is a chance that these spikes in volatility remain high. If that happens, then a larger sell off may take place. Our current positioning has mostly secure investments as volatility has riskier assets in a tough environment. The Fed will be meeting this week. We are waiting to hear more from them before making any larger changes to the investment model portfolios.
Other articles we found interesting this week:
Investors face 3 big questions as a rolling banking crisis shakes markets
Leon Cooperman sees a ‘self-induced’ crisis and a stock picker’s market
Markets remain cautious to start all-important Fed week
Current 401(k) portfolio
Our last 401(k) portfolio reallocation: 5/19/2022.
Want more information?
The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach.
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Trading View. “Volatility S&P 500 Index”. 3/20/2023. Trading View. https://www.tradingview.com/chart/MeVFuzsD/?symbol=OTC%3ABITW
**Keith McCullough. “Volatility Buckets”. 3/20/2023. Hedgeye Risk Management. https://app.hedgeye.com/
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