Stocktake: Volatility continues to frustrate stock markets

If you were not paying attention, you might have thought 2020 was a quiet year for financial markets, given the Dow Jones Industrial Average is now at the same level it was at the end of 2019.

Of course, it has been anything but quiet. Stocks tanked during the spring, then soared as market recouped all their Covid-related losses. September witnessed a rapid double-digit correction, only for stocks to quickly rebound. They plunged again prior to the election as the Vix, or fear index, hit 40 – a level associated with market crises – only to promptly rebound last week, again.

The S&P 500 has moved more than 1 per cent on almost half (47 per cent) of trading days in 2020, notes Datatrek Research. That's extreme – in normal times, 1 per cent days only happen about once a week. The index will see at least 100 such days this year, says Datatrek, a threshold it has hit in only six other years over the last six decades.

Datatrek expects volatility to “remain elevated” for now. That may frustrate nervous investors, but it’s a godsend for volatility-loving traders, who won’t be complaining if markets continue to lurch from oversold to overbought and back again.