Oakland, CA; Piedmont | Ukraine: Measuring Market Volatility with the VIX Index

Hi, I’m Erik Wolfers, founder and managing member of First & Main Financial. We’ve been crafting perfectly personalized financial solutions for clients since 2001. Today, I want to talk a little bit about stock market volatility which I’ve discussed somewhat in the past—but we’ve had negative global events with Russia invading Ukraine, which of course is horrible and it keeps dragging on, but it does impact our investments and markets.

As I’ve discussed previously, markets operate on levels of certainty or knowledge. When things are smooth and going well, markets are generally going up on average. Of course, if there’s fear of recession or we don’t know what’s coming down the pike—inflation is a kind of question mark at the moment—but with not knowing exactly what’s going to happen between Russia and Ukraine, there’s new uncertainty which creates increased volatility.

We watch volatility as many people do through the VIX, which is an index that measures the amount of volatility based on stock option prices. When Russia originally invaded Ukraine several weeks ago, markets went down and they kept going down. When you watch markets on a daily basis you get a sense of the underlying health or the direction or trend—of course there are a number of indicators that can be used to measure trend or strength of trend.

We don’t get too much into technical indicators, but a couple of weeks ago markets solidified pretty significantly and the VIX was trading above 30—which is a line that measures extra volatility or extremely heightened volatility. We were trading above 30 for a while and sometimes historically when you trade above 30 that marks the bottom or the end—although depending on circumstances things can get much worse. But we did all of a sudden get some amount of solidity and then started re-inflating in markets.

These are the kind of things that we look at, whether it’s a good time potentially to put cash in markets and recently we started putting more cash back to work in pieces or chunks, depending on how much we have to work with.

If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.

Thank you,

Erik S. Wolfers, MBA, CFP^®