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Volatility "May be a Healthy Thing" says Fed's Kaplan

Feb 08, 2018

Volatility "May be a Healthy Thing" says Fed's Kaplan

Volatility is always present in equity markets but this week, its presence was quite pronounced!  Is it possible that volatility helps you when you make investment decisions?  This is the thesis put forth by Federal Reserve Bank of Dallas President Robert Kaplan in a recent Bloomberg Markets article. Kaplan posits that rising treasury yields create appealing alternatives to equities, especially in an environment with a heightened VIX index. A rising VIX, commonly referred to as a gauge of investor concern, has increased investor anxiety about equity market valuations. Labeling the continually upward momentum of stock markets in recent months as “historically unusual”, Kaplan works to sooth anxieties by explaining that volatility can be necessary to drag runaway markets back to their natural equilibrium level.


To see the full Bloomberg article and video with the Fed's Kaplan, click here.