The Bottom Line
- By most measures, 2018 has given stock investors a rough ride. For a mostly break-even year, markets have generated two significant downdrafts, one of which, at
-10.2%, qualifies as a bona fide correction. With a range of 8.98 to 50.2, the CBOE S&P500 Volatility Index (the Vix) reflects this year’s choppy waters.
- The common belief that high volatility means lower returns is borne out by looking at both indexes broken out by week. For the 15 trading weeks in 2018 so far, when volatility jumped, index returns fell.
- And the 11 industry groups produced narrow return dispersion, ranging from 0.69% (Materials) to 0.02% (Financials).
- But within the index overall, there was a very different tale to tell: the top 5 stocks rose between 33% and 61% each; the bottom five fell between -26% and -39%.
- The bottom line: Market turbulence can generate substantial opportunities as well as substantial risks. But an overall index can cloud that view – and might preclude taking full advantage of available opportunities.
- Active, research-driven investment management looks beyond indexes, and within sectors to seek value the market might misprice – or overlook.
 All data Source: Bloomberg. For the S&P 500, January 16 – Feb 8, 2018, -10.16%; March 9 – March 23, -7.12%.
 Netflix, XL Group, Seagate Technology, CSRA, Red Hat
 Incyte, Albermarle, Signet Jewelers, Patterson Cos, L Brands