Banking Volatility Explodes
We have talked substantially about volatility on here. When it comes to markets, economics and sociology, volatility is just a fancy word for bad mojo ahead. Substantially increasing volatility usually portends a change in trend. (Hint, hint.) One may measure volatility in many ways. An example may be the amount of reported nonviolent thefts given its correlation to economic opportunity. (Remember this because I have a post written that will go up in the next month citing this very data point.)
Here is a pictorial of volatility in red and the associated banking index below it. It's often hard or impossible to look at a price chart and see volatility. So, this is just a visual representation of volatility that is easier to digest. In this case, a picture is literally worth a thousand words.
The data goes back ten years and includes one of the largest stock market collapses in history. Notice that volatility never really increased in the market collapse in 2000-2003 except for a slight spike in 2002 yet we saw banking stocks have major declines. But, as the market was topping in 2007 and still within 3-5% of its peak we started to see greater volatility (range expansion along the y-axis or the vertical of the graphic) than seen any time during the market collapse in 2000-2003. Using this data point alone, one might surmise this truly is a different kind of bear market than the last. That is, unless you have rocks in your head.
If I were to look at nothing other than this metric, I would steer clear of bank stocks until this period of volatility returned to something more comparable to pre 2007 levels.
Click on the graphic for a larger view
Here is a pictorial of volatility in red and the associated banking index below it. It's often hard or impossible to look at a price chart and see volatility. So, this is just a visual representation of volatility that is easier to digest. In this case, a picture is literally worth a thousand words.
The data goes back ten years and includes one of the largest stock market collapses in history. Notice that volatility never really increased in the market collapse in 2000-2003 except for a slight spike in 2002 yet we saw banking stocks have major declines. But, as the market was topping in 2007 and still within 3-5% of its peak we started to see greater volatility (range expansion along the y-axis or the vertical of the graphic) than seen any time during the market collapse in 2000-2003. Using this data point alone, one might surmise this truly is a different kind of bear market than the last. That is, unless you have rocks in your head.
If I were to look at nothing other than this metric, I would steer clear of bank stocks until this period of volatility returned to something more comparable to pre 2007 levels.
Click on the graphic for a larger view
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