In recent weeks, volatility has been turned on its head. Where will it go from here?

2017 saw incredibly low volatility. The VIX, The Chicago Board of Options Exchange (CBOE) main measure of volatility, ranged between 9.14 and 16.17 for the year. The height of volatility came in August as rhetoric heated up between North Korea and the US. Outside of that, there was little that could rattle the markets. 2017 was only one of two years in the last 35 that did not experience at least a 5% market pullback for the S&P 500.

After all-time lows in 2017, we have seen markets return to more historical norms over the last two weeks. At its height VIX reached 38.80, more than double the maximum reached in 2017.

In the last week, VIX has averaged approximately 21, returning to its long-term average. Inflation is holding steady, initial unemployment claims remain low, and quarterly earnings growth has been impressive. So, with the prior week losing 5.13%, we gained 4.30% this last week and have moved back into positive territory on the year to date return.

This correction was short, bottoming out after only a week and a half. Typically, corrections last a month or two, however, the depth of the correction was notable, landing at 10.10%. The market may be content to move forward, but caution should always be exercised.

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