Friday's Market Minute: Volatility Is Here To Stay?!

Equity Markets have kicked off another September with a bit of uncertainty. September tends to be a weak month for stocks historically. In fact, according to LPL Financial, September has been the worst-performing month for markets, on average, since 1950. The S&P 500 has dropped about 1% on average that month since 1950, the data shows. Throw in the massive rally to all-time highs for most of the major indices, and this September could continue to be a rough one. The closely-watched CBOE Volatility Index (VIX) is hovering just below the 30 level, which is nearly double what the historical average would be. The “Fear Gauge” is reflective of the uncertainty for stocks after a massive five-month rally from the March sell-off.

Bullish sentiment lies on the fact that data is still improving, the Fed has been accommodative and interest rates remain at extremely low levels. Expectations for a massive rebound for the economy in 2021 also have Bulls in an optimistic mood. Market watchers are pointing to strides made on a vaccine for the Coronavirus but that may be months away. Another headwind may be the election in November. VIX futures are trading at elevated levels as uncertainty is likely to remain over the next two months at the least. What does this mean for investors? Get prepared for a roller coaster ride and potential pull-backs as the market will continue to move on headlines and economic data. A healthy pull-back could stabilize equity markets in the near-term and maybe provide opportunities in an uncertain September.

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