SPX - Listed of all the Financial Crisis on SPX since 1980
Index: S&P 500
Frequency: Weekly
Here is the chart showing all the financial crisis and the flash crash on SPX since 1980 with the VIX -0.61%Index as comparison. The major global financial crisis happened four times since the 80s with the average bear market for 17.5 months and the average loss of -42%. Every time the market suffered from a flash crash or a great recession, we can observe that VIX index surged high and on average hitting above 40. i.e. 1998 Russian Financial Crisis, 911, 2007-08 Financial Crisis and 2011 Black Monday, etc. The last bear market ended in March 2009 and develop a second strongest bull market in history with nearly tripled return in almost 9 years.
People are worried about the stock market will have an inevitable correction in the near future, however, the VIX index is currently remaining a very low level (second lowest low on record in July 17), meaning the implied volatility of SPX is at historic lows as well. Theoretically speaking, market is comfortable with the current level. From my point of view, the extremely low levels of VIX persisted for a long periods is a sign of upcoming market stress as investors are over-optimistic regarding market risks. As we can see from the chart, the current VIX index has similar pattern as in late 2006, both remaining low level for a long time and hit the historical lows. Therefore, I think is time for investors considering whether the market will keep momentum upwards or not and be rational for their investment plan on stocks as a number of stocks in US are already thought to be overvalued.
All in All, I’m not saying the bomb will explode immediately like tomorrow or any exact date because no one knows at least I don’t know. The financial market nowadays is more complicated than before and there are plenty of intrinsic risk factors can be triggered to the next globe crisis. Personally I think the market will still able to last its momentum uptrend for a while at least, however, from now on we should be more attention of the Fed and other central bank reaction, especially how they imply to tightening the monetary policy.
Frequency: Weekly
Here is the chart showing all the financial crisis and the flash crash on SPX since 1980 with the VIX -0.61%Index as comparison. The major global financial crisis happened four times since the 80s with the average bear market for 17.5 months and the average loss of -42%. Every time the market suffered from a flash crash or a great recession, we can observe that VIX index surged high and on average hitting above 40. i.e. 1998 Russian Financial Crisis, 911, 2007-08 Financial Crisis and 2011 Black Monday, etc. The last bear market ended in March 2009 and develop a second strongest bull market in history with nearly tripled return in almost 9 years.
People are worried about the stock market will have an inevitable correction in the near future, however, the VIX index is currently remaining a very low level (second lowest low on record in July 17), meaning the implied volatility of SPX is at historic lows as well. Theoretically speaking, market is comfortable with the current level. From my point of view, the extremely low levels of VIX persisted for a long periods is a sign of upcoming market stress as investors are over-optimistic regarding market risks. As we can see from the chart, the current VIX index has similar pattern as in late 2006, both remaining low level for a long time and hit the historical lows. Therefore, I think is time for investors considering whether the market will keep momentum upwards or not and be rational for their investment plan on stocks as a number of stocks in US are already thought to be overvalued.
All in All, I’m not saying the bomb will explode immediately like tomorrow or any exact date because no one knows at least I don’t know. The financial market nowadays is more complicated than before and there are plenty of intrinsic risk factors can be triggered to the next globe crisis. Personally I think the market will still able to last its momentum uptrend for a while at least, however, from now on we should be more attention of the Fed and other central bank reaction, especially how they imply to tightening the monetary policy.