Over the last few weeks we have seen volatility increase, but not all of it has been bad.

There was a period of 109 days where the market did not move 1% in either direction. There were many days where it did not move even .5%. However, in the last couple of weeks, markets have started to grab hold to activity, regardless of volume and regardless of direction. The swings, while mild from a historic standpoint, are becoming more dramatic.

Volatility, as measured by the CBOE VIX, crossed just above its 10-year average this week. In the last year, it has breached that average six times (the last time being six months ago, during the presidential election). Supporting the case for the increased volatility in markets, would be a stronger than expected earnings season. This earning season has started with a bang and has gotten quite a bit of attention. However, increased volatility may also be coming from the increased fragility of the hope trade.

Earnings season may buy Washington time to resolve issues and get some of the hope trade agenda items completed. As a reminder, the hope trade is reliant on: tax reform, financial regulation reform, infrastructure spending, and healthcare reform. Further complicating the situation are geo-political concerns and European election risks; expanding this week with the addition of a UK election in June. These increasing risks make action on the hope trades agenda items of the utmost importance.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.

Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.