Stock Market Variability and Volatility in 2016

One of my favourite weekly read is the updates from 361 Capital’s Blaine Rollins. The other day, when reading the most recent edition, there was a graph that jumped out at me. I’ll share it with you in a second.

But first, let me set it up for you.

Think about your stock portfolio. And in particular, think about how much it swings around on any given day. Does that get a reaction from you? Should it?

Well, as I was saying, I saw an interesting graph (source)…


Do you see what that means? Essentially, in the US, over 70% of daily price movement in equity markets is due to macro variance. Talk about correlations!

Basically, that means it doesn’t matter what stock you pick. 7 times out of 10, your fate is going to be dictated by something outside the company.

And while we’re at it, here’s another interesting chart from Eddy Elfenbein at Crossing Wall Street that shows volatile days are not spread out. When it rains it pours.

screen-shot-2016-09-13-at-9-49-03-pm So what does it all mean? Is it actionable? Well, not really.

First of all, I think it’s Just something to be aware of. When times get crazy, it’s not necessarily because you’ve done anything wrong. It’s just the way it goes. Emotions take over, everything moves in a convoy and it all happens at once.

The other thing that’s not mentioned is magnitude: If during the 30% of the time your stocks are moving on their own accord they are steamrolling higher by huge margins, well, then maybe this isn’t so horrible after all.

As with everything in investing, there are nuances, quirks and