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Yikes

Posted by kdadmin on August 28th, 2013.

Yikes. That’s all I can say about the recent market volatility.

In the attached image, the blue shaded region is SPY (an ETF representing the S&P 500 that NONE of us have owned since mid July). The red line is the VXX (a volatility index). As you can see, since my last email on 8/16/13 through yesterday (8/27/13), the S&P has dropped 1.5% and the VXX has shot up 10%. In other words, “Holy Vicious Volatility, Batman!” (All data courtesy of Yahoo.)

Yikes

So, we’re going to continue to sit this one out a bit. Today, the S&P is up a smidge, but at least neither it nor the futures on the S&P are hemorrhaging like they were yesterday.

Geekery Afoot: By the way, I’m going to start phasing into using the Wilshire 5000 as a benchmark instead of the S&P 500. While I know the S&P is more recognizable, it isn’t particularly representative of the market at large. While the S&P 500 does contain 500 US stocks, over 65% of the assets are represented by the largest 50 US stocks. The Wilshire 5000, on the other hand, is made up of over 4300 stocks, and better represents the small and midcap portions of the market. Simply put, the Wilshire 5000’s movement should be more consistent with the overall economic cycle; at least in theory.

Finally, If the word “Wilshire” only conjures up images of “Hillshire” smoked bacon, and you’d like to learn more about what the Wilshire 5000 means to you, just send me a note. I’ll be happy to go through it with you in more detail.

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