How Market Volatility Plays Into The Fear Index


Support for this podcast and the following message. Come from Comcast business having the nation's largest gig speed network was just the start. Now, they're providing gig fueled apps and solutions that exceed expectations and help businesses perform Comcast business beyond fast. The end of two thousand eighteen was a time for anxiety. If you own stocks, the market plunged only to soar days later, and then slip again. But there might be less cause for concern that it seems here's Stacey Vanik Smith and Patty Hirsch from NPR's planet money indicator podcast market volatility is measured with something called the Chicago Board of options exchange volatility index or the vix the vix also known as the fear index. It's much better name, but a little terrifying. The reason it's called the fear index is because when investors are afraid they contend to start acting radically like buy-sell, wait. No by and volatility light. We've been seeing recently. Can be really stressful unless you're Georgetown, economists Jim angel. I kind of enjoy the volatility. Really? Yeah. I mean because this is the stuff I study, right? I'm a nerd Jim says this full Attila the is happening because there's just a lot of uncertainty right now. Like this a lot of big important stuff. Feels like it's up in the air, both politically and economically. What's going to happen with the government shutdown? What's going to happen with trade Warners and terrorists, and many people think that a recession is coming just know how land or how deep so says, Jim there are reasons to be super worried, but one of the things that he told me is that volatility is actually normal and healthy in the stock market. Jim says the extra volatility that we're seeing right now worries him a lot less than what happened to the fear index in twenty seventeen twenty seventeen was actually one of the least volatile years for the stock market ever Stokes, assisted the slow steady March up and up and up and up when the markets are. Q complacent and everything looks really good. That's when you should be worried so Patty to sum up, the first reason to be optimistic, according to Jim angel in spite of all this volatility is that a certain amount of volatility is healthy. The second reason to be optimistic Cording to Jim is that when people are scared and stock prices full, those Stokes get cheaper. It mean, I'm going to get better prices when I buy stocks at the end of the month is part of my normal retirement plan. So if you are saving money for retirement through work in a four one K plan or a four three b Jim says, a volatile market can be good news, depending on who you are a fall in the stock market is great news for young people. The fact that stock prices have come down means that when they take this month's paycheck and buy some stocks with it. I get more shares than I got last month. But this brings us to the bad news. If you're close to retirement a falling stock market or a really volatile stock market is really hard to deal with because you don't know if you should pull your money out or keep it in or move it into safe. Territory we call that period when people are in their fifties and sixties the retirement red zone the red zone. Yes. And Jim says, you know, if you're in the red zone what you have to try to figure out right now when the markets are really volatile is this is a temporary blip. Or if this is signaling a coming drop in the stock market. Of course, knowing that is not possible. So you just have to guess, I'm not a very good soup Sayer or astrologer. So I would say consulting people who swatter the pigeons and look at the entrails for a better forecast and don't buy stocks during mercury retrograde. And that is the point right? When people don't know they get scared, and then a stock market kind of wigs out and jumps around. Just like it's doing right now. Could be a long year. Stacey smith. Probably Hirsch NPR news.

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