The 10-year treasury yield is back below 2%. The U.S. Dollar is surging as aÂ safe haven currency. And U.S. stocks in the S&P 500 have dropped nearly -5% from recentÂ highs.
In spite of the “risk-off” indications,Â the CBOE Volatility Index (VIX)Â has been showing lower levels of implied volatility. How can that be?
In his commentary below, Bill Luby explains that December serves up aÂ “holiday effect.” Historically, there’s nearly a 50-50 chance that volatility via the VIX mayÂ hit an annualÂ low in the last calendar month.
If the VIX slumbers as it approaches Christmas, some of it may be attributable toÂ the fact that there are fewer trading days in holiday-oriented months. Some of it may be attributable to the tendency for bullish movement in stocks in December and January. (ThinkÂ “Santa Claus rally” andÂ the “January effect.”)
On the other hand, there may be a different explanation for lower volatility in the current calendar year.Â PerhapsÂ the investment community isÂ growing more accustomed toÂ erratic price swings; that is, while the micro- andÂ macro-economic positives (e.g., record corporate profits, China loosening monetary/fiscal policy, etc.) may not be enough to overcome the severity of the mess in Europe, there’s just enough upbeat data points to keep value hunters on the look-out.
If you’re not “buying” any of it… if you believe that the Euro-zoneÂ debt crisis will erupt yet again in 2011… you couldÂ purchase theÂ iPath S&P 500 Short-Term VIX Futures (VXX). This exchange-traded note would really pop if the sleeping volatility giant decided to wake.
Â December Is The Cruelest Month… For The VIXâ€“ Bill Luby, VIX And More
Best ETF For 2012: Vanguard MSCI Emerging Marketsâ€“ Alex Dumortier, Motley Fool
ETF Ideas: The 3 Best Countries To Invest In Now â€“ Greg Group, Seeking Alpha
One Year Later: The Other Precious Metals ETF (WITE )â€“ Stoyan Bojinov, ETFdb
ETFs That Are New, But Not Improved â€“ Ian Salisbury, Smart Money
Disclosure Statement: ETF ExpertÂ is a web log (â€ťblogâ€ť) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.