US Markets

Wild swings on Wall Street? Nah, more like kiddie swings

Adam Shell
Trader on the floor of the New York Stock Exchange.
Getty Images

The stock market has taken investors on a wild ride this year, right? Umm, not really. Wall Street's daily price moves have been more akin to kiddie swings than a roller coaster ride.

"I keep hearing that volatility has returned to the market," says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. "Maybe, if you just started trading."

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Why is Silverblatt downplaying what seems like wild ups and downs this year? Because the statistics simply don't back up the thesis that the market is gyrating wildly, at least when compared to history.

Markets rally on roller coaster day
Markets rally on roller coaster day

When using a simple measure of daily volatility (daily price high divided by the low price), the stock market isn't showing acute signs of manic-depressive behavior. Daily volatility this year is averaging 0.95%. And while that is up from 0.85% in 2013, it's way below the 50-year average of 1.47%—or more than 50% higher than this year.

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So why does everyone think Wall Street is suddenly more scary than before?

Simple, last year's average daily price swing of 0.85% was the least volatile year since 1995!

So what does real volatility—the kind that keeps you up at night—look like?

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Flashback to 2008, the year Lehman Brothers filed for bankruptcy and the stock market basically crashed. The S&P 500 suffered average daily swings of 2.81%.

"We saw (many) days where the index was up 1% at 3 p.m. and closed down 1%," Silverblatt recalls.

The fact that the S&P 500 isn't up that much this year and fewer stocks are in the black also makes the market feel more volatile, Silverblatt adds.

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"Last year saw significant gains in the market, as 2013 posted a 29.6% gain, with 457 of the S&P 500 issues gaining, as compared to the 2014 year-to-date, which is up 0.81%, with 275 issues up," says Silverblatt.

Also differentiating this year is the number of issues with returns that dwarf the index return of 0.81%. To date, 103 issues are up at least 10%, with 51 declining at least 10%.

"While the index has been flat, it would appear the battle from within has been raging, and that has added to the perception of volatility," Silverblatt says.

By Adam Shell of USA Today