Breaking News

VIX At A Seasonal Turning Point

By Callum ThomasStock MarketsJul 13, 2017 12:06AM ET
VIX At A Seasonal Turning Point
By Callum Thomas   |  Jul 13, 2017 12:06AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The topic of seasonality is a controversial one among investors. Some swear by it, referring to studies that present evidence for a reliable seasonal pattern across the year, verified across global equity markets. Others dismiss it as noise; nothing but a random assembly of outliers - or ignore it due to a lack of reliability.

Whatever your view is, the historical averages, the numbers, the data, appear to show a distinct pattern. And while you can often get lost or deceived in the averages, the chart below shows that July (i.e. now) is the turning point for stock market returns and volatility.

The historical seasonal pattern is that the VIX (implied volatility) tends to rise on average from July through October. The second chart shows, much as you would expect, that the stock market itself is typically weak through that period also.

The rule of thumb for seasonality is you don't want to rely on it, but incorporate it as one factor among many into your investment process. For example, if you said S&P 500 valuations are expensive, the Fed is hiking rates, lending standards have tightened somewhat, sentiment is increasingly bullish, and there are a few geopolitical risks lurking in the shadows...and then pointed to the negative seasonality that has historically characterized the July-October period, you might come to a conclusion that the risk of a correction is elevated short term.

Here's how the VIX is trading so far during 2017 vs the historical average level from 1990-2016. Typically July is the seasonal turning point.

VIX Seasonality 2017:Historical Average
VIX Seasonality 2017:Historical Average

Putting it into context with the S&P 500 itself, here's the stock market risk vs return seasonality map.

SPX:VIX Seasonality
SPX:VIX Seasonality

VIX At A Seasonal Turning Point
VIX At A Seasonal Turning Point

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Write your thoughts here
Replace the attached chart with a new chart ?
Post also to:
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Kai London
Kai London Jul 13, 2017 7:48AM GMT
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree with this analysis
0 0
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email