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Market Volatility – Perceived or Real?



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Market volatility is not new!


market volatility

Recent market volatility is just a blip in the history of market ups and downs!

The market will always fluctuate and no amount of regulation or analysis can arrest the ebb and flow of the markets.

The volatility of the US share market in 2011 is a little above average but it is well within historic norms and nothing like that experienced by our forefathers during the 1930's.



tulip mania by bruegel The History of Volatility in the Stock Market

If we go further back in history, the volatility of the 1870’s railroad crash, or the Tulip mania of the 1600’s, the South Sea bubble in the 1700s,

great depression

the Florida Real Estate Craze in the 1920’s, the Great Depression of 1929, and several more major market crashes since then, make our recent market swings look trivial.


Commentators have been blaming excessive government debt, the stimulus in Europe and government intervention for recent market instability, but current volatility is well within the normal historical range.

cycle of emotion Emotion and Market Volatility

Perception of the volatility increase is often encountered due basically to emotions that come to the forefront when stock trading, and this may not be a logical approach. The “fear factor” is an ever-present condition – within any market situation. If there is a bull market, traders will worry about when the market will take a downturn, when the market is bearish, traders are concerned about “bottoming” and missing opportunities, and a myriad of other scenarios.

wilshire 5000


Analysis of Market Volatility

Data from Wilshire Analytics, through examining the monthly stock returns of the Wilshire 5000, which is the total US stock market, certainly provided a bit more of a clearer picture in regard to the volatility perception!

rebalance Market volatility is definitely a part of our daily stock market trading lives. There are many great ways to benefit from the market volatility is to “re-balance, play the market cautiously but also remain active”.

The method I employ, to put this advice to a beneficial and profitable use, is to play the options market – this works, if properly administered, in any market environment.

“The markets remain as volatile as ever and this will always be the case.”

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