Another day, another big move by the S&P 500. If you're keeping track, Thursday afternoon's 1.2 per cent gain marks the eleventh move of 1 per cent or more since the benchmark index touched a record high on September 18.
That's eleven out of 24 trading days, or nearly half. Consider that over the previous 28 trading days, the index sustained no moves of 1 per cent or more.
Here's another way of putting it: The Dow Jones industrial average has made 17 triple-digit moves over the past 24 trading days, including a sharp downturn earlier this month and an equally impressive rebound over the past week.
Where has the volatility left us?
In some ways, we're heading back to where we started. The CBOE Volatility index – or VIX, the so-called fear gauge that rises when investors turn nervous – has fallen to 16 after spiking above 26 last week. In other words, nerves have been soothed after their worst rattling in three years.
The 10-year U.S. Treasury bond is also reflecting a calmer state among investors. The yield, which moves in the opposite direction to price, plunged below 2 per cent last week as investors sought refuge from the stock market. It has since rebounded to about 2.3 per cent – low, but not run-for-safety low.
Indeed, David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, believes that the United States has "inherited" the yield "from the recession-bound euro area economy" – suggesting that it is probably not reflecting scared investors at this point.
But the stock market, despite an impressive rebound in recent sessions, still looks shaken.
Consider the S&P 500. After Thursday's rally, the index is back to where it was in early June, meaning that it has delivered no return in about four-and-a-half months. Yet, economically sensitive areas of the market (energy stocks, industrials and materials) have faltered over this period, while defensive stocks (health-care and utilities) have risen.
The same holds true if you look at returns since the S&P 500 hit a record high on Sept. 18: Energy stocks, materials, technology stocks and financials have been flattened, while utilities and consumer staples are up and health-care stocks are close to even.
Canada's less-diversified S&P/TSX composite index shows a similar pattern: Commodity producers have been hit hard since early September, when the index touched a record high, while health-care has rallied and staples and utilities are relatively flat.
Some market watchers believe that a period of volatility sets up new winners and new laggards. That's difficult to see right now: Over the rebound of the past week, some of the most beaten up sectors have seen the biggest gains.
In the S&P 500, energy stocks have risen 6.7 per cent, industrials have risen 6.2 per cent and materials have risen 5.4 per cent – suggesting that hope in the global economy, skewered during the downturn, has not been extinguished.
But will economically sensitive stocks continue to lead the way higher as the year winds down? Be careful: The rebound is just six days old.