Please, Give Me a Break

2016 got off to a volatile start, it felt like every day was either up or down one percent. In fact, when I made this chart on March 11th, 28 of the first 46 days of the year fit this criteria.


Now seven months later, that number has fallen off a cliff, collapsing to just 22%. And just as we all thought would happen, volatility vanished as we got closer to the election. The chart below with the red diamonds is a good visual of the volatility tapering.


It turns out that election years aren’t more volatile than normal, at least looking at the number of one percent moves. The average of all years going back to the election in 1928 shows that 24% of all days move one percent, versus just 22% of the days for election years.

The idea that the election would cause volatility is another example of linear, if then thinking. It’s never that easy. And now the narrative has shifted from stocks are volatile because of the upcoming election to stocks aren’t going anywhere because nobody wants to do anything before the election. Please, give me a break.