As I posted the other day, the market has been volatile of late. After reaching a high in Mid-July of 1555.90 the S&P touched 1427.39 on Monday (Aug 6) a drop of over 8%. But now back to 1497.49, the S&P has come back 4.9% from this recent low. This recent blip will look just like any other, meaningless in the long term. What will the market do tomorrow? Random Walk tells me I don’t know, and that short term movements simply don’t matter.
JOE
The market has gotten more volatile in the last month. Average point move on the S&P in the last 30 days has been 14.4 compared to the last year’s average of 6.9. This kind of volatility can certainly turn your stomach, but it’s the long run that matters. I touch on this topic in my article Market Timing, and also would recommend a look at MoneyChimp for an interesting take on how volatility for longer time horizons decreases.
Edit - I offer this chart courtesy of Yahoo Finance, illustrating the recent upturn in the VIX, the CBOE Volatility Index.
While short term, volatility has spiked up, we have just returned to the range of 1998 - 2003. We survived those days, and this, too, shall pass.
JOE
