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The Low Volatility Myth

There is talk lately in the financial media about an “unusually low volatility” in the stock market. This is another myth. It is created because the financial media needs myths to create stories. Without myths this is difficult because truths about the market are either scarce or constantly change.

Where is the unusually low volatility? The SPY daily chart since inception below shows simple daily returns and the annualized standard deviation:


The annualized standard deviation of simple returns is 11.1% and much above the 1995 low of 8.28% and the 2006 low of 9.47%. Actually, based on these lows, the volatility is a little high for this type of bull market. The “unusually high volatility” is another financial media myth that probably someone started to setup a strawman argument and now many are using it without taking the time to plot a chart.

Another myth is that this bull market started in 2009. Actually, until the end of 2012, yes you read that well, 2012, S&P 500 was moving in a giant sideways channel. The bull market probably  started in 2013. Stocks are still trying to catch up with bonds and gold. See this post for more details. Of course, this does not imply that this bull market can go on for much longer because predictions are impossible to make. However, that the bull market started in 2009 is an illusion of charts. When some notable permabears realized that they threw in the towel.

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Disclosure: no relevant positions.
Charting program: Amibroker

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