Market Volatility

Chart of the Week for October 26 - November 1, 2007

Volatility in the stock market, as measured by the Chicago Board of Options Exchange VIX Index, fell 26% over the last two months since the index reached a multiyear high on August 16, 2007. While the Dow Jones Industrial Average declined 3% this past Friday, the VIX index closed at 22.96, nearly 8 points below the index's highest value for 2007. The VIX Index is a commonly used measure of the market's expectation of volatility and risk over the next 30-day period. A high VIX Index level is generally associated with a period of increased volatility and uncertainty in the market, while a lower level corresponds to less volatility and stress in the market.

Although the VIX index has risen nearly 99% this year, Friday's level of 22.96 remains below the levels of 43.74 and 45.08 reached in 2001 and 2002, respectively. Putting volatility into perspective, approximately 28% of the years between 1926 and 2006 had negative S&P 500 returns. However, every 20-year period during the 81-year time frame, including the Great Depression, posted a positive return in the S&P 500.

In short, for investing in U.S. stocks as measured by the S&P 500 Index, it has been "time in the market" and not "timing the market" that has rewarded many investors. As short-term market fluctuations are hard to predict, it is important that investors remain diversified and keep a long-term focus to help reach their retirement goals.

The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.