Gavekal Capital: Stock Volatility Has Picked Up...A Little

Thursday, December 18, 2014

Stock Volatility Has Picked Up...A Little

We have had a small pickup in volatility in the equity markets since October. After a five month span from May-September that saw the daily change in the MSCI World Index vacillate between -0.5% to 0.5% with an average daily change of 3 basis points, we have had an increase in the number days that have ended either up 1% or down 1% and the average daily change has declined slightly to 0 basis points. .
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The six-month moving sum of days where the MSCI World Index finished down by at least 1% has increased to 10 days. This is the most 1% down days in a six-month span in 14 months. Back in February, the six-month sum was just two.

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Also, for the first time since November 2012, we have had 2 instances in past the six months that the MSCI World Index declined by at least 1% on consecutive days. To put that in perspective, we had a 14 month span from Feb 2013 to April 2014 where there wasn't one instance of a back-to-back 1% decline in the MSCI World Index.

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Finally, the one-quarter moving sum of the cumulative number of stocks that have had at least a 5% decline in a day is at a 15-month high. However, just as is the case with the two charts above, it currently stands at a far lower level than we have true distress in the market such has in 2011 and 2008/2009.

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