U.S. Treasury Secretary Steven Mnuchin is concerned about market volatility.
So concerned, in fact, that he said in a roundtable interview at Bloomberg’s Washington office on Tuesday that he plans to ask the Financial Stability Oversight Council, which he oversees, to look into what’s causing the turbulence. His working hypothesis is that high-speed traders and the Volcker Rule are to blame.
If Mnuchin was concerned on Tuesday, he must be spooked by now. The S&P 500 Index fell 1.5 percent on Wednesday and an additional 1.6 percent on Thursday. And the market expects more pain. The CBOE Volatility Index, or VIX, which measures expected volatility over the next 30 days, closed at 28.38 on Thursday, up 73 percent since Dec. 3 and 11 percent since Tuesday.
But here’s the reality: There’s nothing amiss about the recent volatility, and if anything, volatility has been lower than usual in recent years, not higher.
ETF enthusiasts gathered recently in Hollywood, Florida, for the “Inside ETFs” conference, the industry’s biggest party of the year. By many accounts it was the swankiest celebration yet.
And for good reason. When Inside ETFs first convened in 2008, ETFs managed $500 billion, or one-twentieth of the money managed by mutual funds, according to Broadridge. ETFs now oversee $3.4 trillion, or one-fifth of mutual fund assets, according Morningstar data.
Low volatility is great, but it doesn’t mean investors should pay more for stocks.
It’s been an unusually quiet time for U.S. equity markets. Stock watchers’ favorite barometer of volatility, the CBOE Volatility Index, or VIX, has averaged just 11.1 so far in 2017 through Monday, making it the calmest year on record. (The lower the VIX, the lower the volatility, and vice versa.) The gauge has averaged 19.4 since its inception in 1990.