During the summer months the markets have climbed a wall of worry and in such a market volatility has been relatively low. Market volatility measures a level of fear or complacency in equity markets, with low volatility defined as lack of fear. The last time volatility peaked was in October 2011 and has been steadily decreasing ever since. We don’t expect this to continue much longer as this marks the beginning of a season of decisions that will affect many markets and investments here and abroad.
First, the Fed met last week to discuss the current status of our economy. There was general expectation for the Fed to announce QE3, based upon the most recent spate of weak economic data. Yes, another round of bond buying by the Fed to increase money supply to the U.S. After the Fed announced an unending QE3, the markets as expected fluffed up a bit more of its sugar high.