Declining market volatility continued in the month of May. Also, the S&P 500 had a very good month, returning 4.8%. However, the broad-based index is still down 5.0% for the year, including dividends. The chart below updates the returns from last month for returns through May 29, 2020. As these results show, the ETFMathGuy Moderate and Aggressive portfolios continued to outperform the S&P 500. The premium portfolios for April and May 2020 are now available to all subscribers. The latest premium portfolios for June 2020 are available to paid subscribers.
Markets returning to normal?
The declining market volatility suggests that the fear in the markets continued to subside in May. However, they are still elevated above their long-term historical average. The image below shows the volatility from our daily monitor that tracks the S&P 500 ETF (ticker: IVV). We determine the standard deviation of daily returns over one, two and three month periods, and report an average to find a daily value. As of Friday, May 29th, volatility was 37.8%, as shown below.
Market Volatility Still Higher than Normal
Analyzing over 5,000 trading days since mid-June 2000, we can see how “out of the norm” current volatility really is. The table below shows the distribution of volatility over this nearly 20-year time period. As this table shows, we are still in the 96 percentile of volatility, meaning only 4% of the days since mid-June 2000 exhibited higher volatility then on May 29th, 2020.
Stock markets returning to “normal” can be very subjective. The table above can provide a more objective perspective to such an assessment. However, if the downward trend continues, it may not take much longer before volatility returns to its long term historical norm.
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