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Home / Business / The Simple Reason Why The Dow Triggered a 9-Quarter Winning Series: Wall Street's "Fear Index."

The Simple Reason Why The Dow Triggered a 9-Quarter Winning Series: Wall Street's "Fear Index."



The Dow and the S & P 500 halted a record-breaking series of quarterly earnings at nine, and the clearest reason for this could be the VIX index, widely known as the Wall Street "Wall Street Feist".

The Dow Jones Industrial Average

DJIA, + 1.07%

posted a quarterly decline of more than 2.3%, offsetting the longest series of quarterly gains for the blue-chip average since an 11-quarter rally, the ended in the third quarter of 1997. The S & P 500 Index

SPX, + 1

.38%

posted a quarterly decline of 1.2% and ended its longest run since the first quarter of 2015.

Read: The Dow Curve of quarterly earnings runs the risk of ending at nine

There may be quite a number of reasons for the sudden surge of such a bullish run on key stock benchmarks: the Federal Reserve's normalization of monetary policy since the central bank since December 2015 raising interest rates for the fifth time this month; To reinforce the uncertainty in the constitution and agenda of President Donald Trump's administration, underlined by a series of high-profile departures; and the heightening of the fear of trade fears after the President imposed tariffs on steel and aluminum imports and raised tariffs on the world's second-largest economy, China.

However, the rise in the Cboe Volatility Index

VIX, -12.68%

is perhaps most strongly correlated with the downtrend of the market. According to the WSJ Market Data Group, the VIX recorded its largest quarterly rise, up more than 80% (provisionally), after falling in the third quarter of 2011 after the [19659009] Standard & Poor's historic downgrade Creditworthiness and worries about the debt crisis in Europe.

The VIX reflects the collective expectations of the options traders for the volatility of the S & P 500 over the next 30 days.

Much has been said about the muted values ​​of gauges over the past 18 months, which ended with an index rise of 115%. on the 5th of February.

As this period of unnatural calm has come to an end, the index has climbed to trade near its historical average of 19 or 20.

The rise of the VIX in February, which capsized a series of risky trading strategies based on the volatility of betting, would remain cautious, which means a significant change in sentiment and the tenor of Wall Street sentiment and a return to a system of higher volatility.

What does all this mean?

Josh Brown, the CEO of Ritholtz Wealth Management LLC, put it in a Wednesday blog post:

Josh here – just because the volatility has increased and the market has obviously changed character, that is not that investors should change their own character. The adoption of new tactics should be left to professional traders. For investors, the emergence of unexpected price losses and market disruptions brings new opportunities to reap the imprudence and forced mistakes of others.

Check out : Opinion: How to Play the Volatile Highs and Lows of the VIX [196592002ItisnaturallydifficulttosaywhethertheVIXstockmovesorwhetherthedeclineinthestockrepresentsashiftinvolatilitydynamicsConfidentially:Apieceofextraordinaryserenityisover


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