Volatility can be a maker or breaker for portfolios. But there are periods of time, sometimes quite long, where volatility is boring and nothing really happens.
For the month of February, the S&P 500 returned 5.34% and the 60/40 portfolio, reflected by the VBINX Fund, returned 2.72%. At the end of February, the VIX stood at 13.40.
US stocks continued their ascent in February, with the S&P 500 and Nasdaq indexes reaching new all-time highs. Yet, volatility has not decreased to all-time lows in response, with the VIX sitting roughly 2 points higher than where it began 2024. Part of what is happening in the volatility space is an inversion of the classic mantra that markets take the stairs up and the elevator down. Currently, the S&P is seeing about 3% more volatility on market up moves than on down moves; which is likely keeping a bit of a bid in volatility pricing.
A good way to think about the markets and volatility is by using the graphic below. We are sitting in quadrant 3, Market Rising/Volatility Falling. It still feels like market volatility is a coiled spring waiting to pop. It continues to gradually fall but the timing seems like we will be due for a pop in the coming years.
