We followed that with a hair-raising start to 2016, where the S&P finished down 1.5 percent after being down more than 2 percent intraday.
Volatility is, in part, due to the explosive popularity of derivatives like options and futures – and Exchanged Traded Funds (ETFs). Buying or selling rights to assets (that's what derivatives are) like stocks gives markets directional signals that overstate actual supply and demand, producing big market swings.
ETFs are, in effect, the most popular derivative. Last year, 81 percent of financial advisors recommended ETFs, according to the Journal of Financial Planning. And, while the rate of conventional institutional turnover (the amount of assets under management sold each year) was 42 percent, according to the Investment Company Institute, the rate of change in holdings for ETFs is an astonishing 2,200 percent, according to ETF portal ETFdb.com.