There’s been a lot of discussion lately about what the sharp drop in market volatility might mean for investors.
Take a look at the chart below of the VIX index, which is a measure of implied volatility of S&P500 index options. Also called the “fear index”, the higher the index the higher the market’s fear factor. While it’s an index for the US stockmarket, it’s useful for domestic investors as well given the high correlation, over time, between the All Ordinaries and US indices. I’ve referred to it on a few occasions before, as it’s a good indicator to keep an eye on. The important thing to note now is that not only is volatility very low, it’s nearly back at the lows we saw in 2006-07 (i.e. around 14-year lows).