Volatility and Equity Market Performance
Chart of the Week for May 15 - May 21, 2009
The chart above compares the monthly price movements of the S&P 500 Index and the Chicago Board of Options Exchange Volatility Index ("VIX") over the period of time from January 1999 to April 2009. A general inverse relationship trend is discernible from the data, meaning that the VIX is likely to move down when the S&P 500 Index moves up, and vice versa.
The S&P 500 Index tracks the performance of 500 large-capitalization stocks traded in the U.S. The VIX is a commonly used measure of the market’s expectation of 30-day volatility for the S&P 500 Index. It is based on real-time S&P 500 Index option prices, which reflect investors’ consensus view of future expected stock market volatility.
Typically, during times of financial distress, the future viability of companies is uncertain and the consensus of stock prices becomes more difficult to determine, which generally leads to increased price fluctuations or volatility. Over the last 18-24 months, volatility has spiked to historic highs while a dramatic bear market has sent the S&P 500 Index to its lowest levels in over twelve years. During the market rally of the last few weeks, volatility, while remaining elevated compared to historical values, has decreased.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
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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.