Volatility is back

Stock markets careened again last week, with the S&P 500 swinging by more than 1 percent in three of the four trading days.

If such a stretch had happened last year, it would have been big news, but it’s closer to typical for this year. The S&P 500 has already had 35 days this year where it’s moved up or down by at least 1 percent. That puts it on pace for its most volatile year since 2011, when panic around the European debt crisis and the downgrade of the U.S. credit rating whipsawed stocks.

Besides inducing a sense of nausea, increased volatility can also be a warning sign for investors. Volatility, as measured by the VIX index, tends to be at its lowest point when an economic expansion is in its middle years, before it picks up in the last year and then spikes higher after a recession begins, according to Credit Suisse strategists. The VIX is currently at about 13, which is above its average of 11.1 last year, but it’s well below its level from February, when it was approaching 40.

Lately worries have centered on the possibility of a global trade war hurting economic growth and of the impact of higher interest rates. Last week, stocks also rose and fell with worries about whether Italy’s government may push to leave the euro currency.

One piece of solace for investors is the resilient job market, which has continued to power higher. On Friday, the government said the unemployment rate fell to an 18-year low, which should help support the economy.

This article provided by NewsEdge.