Volatility awakened in February after a two-year hibernation. In this month’s commentary, Milliman’s Joe Becker addresses the following:
• After 15 consecutive months of positive returns, the global equity market posted its first negative monthly return since October 2016 and its highest monthly volatility since June 2016.
• Up more than 7% year-to-date into late January, the global equity market quickly changed direction and sold off more than 9% in less than two weeks.
• February saw 12 daily moves in the S&P 500 of at least 1%, already 50% more than 2017’s total of eight. In addition to higher realized volatility, the VIX spiked to its highest level since August 2015.
• The start of February’s downturn coincided with two economic data surprises. Larger-than-expected growth in both payrolls and average hourly earnings triggered fears that the Federal Reserve would begin to tighten policy at a faster rate than previously expected.
• As is often the case in times of market stress, February’s downturn saw correlations across market segments and asset classes push higher.
To learn more, download the full commentary at MRIC.com.