Market Volatility Drops

In late March, the average absolute daily change of the S&P 500 over the last 50 days got all the way up to 1.29%. That means the market was averaging gains or losses of more than 1.25% every day. Since its peak, the average daily change of the index has dropped to 1.03% and looks to fall below 1% in the coming days.

While the pickup in volatility was extreme, it was amplified by the fact that volatility had been so low for the years leading up to 2007. As shown in the first chart below, the average absolute daily change was at or above the 1.29% peak in March multiple times from 1998 to 2002.

We also provide a chart of the more widely followed VIX volatility index below. After peaking at 32.24 on a closing basis on St. Patrick's Day, the VIX has fallen back below 20 to 18.21, signifying a definite calming of the markets.