cheer up. Wolff Research said market volatility is likely to intensify as the White House race enters its final weeks. Technical strategist Rob Ginsberg tracks the average move in the Chicago Board Options Exchange Volatility Index (VIX) during presidential election years. He ruled out 2008, a year that saw unusual market volatility as the U.S. grappled with the global financial crisis. Ginsburg’s data shows that the VIX index, known as Wall Street’s “fear gauge,” tends to spike in early November, on Election Day. The index has since declined historically as the month has progressed. Below is Ginsburg’s chart of the average path for a typical election year. Note that the Y-axis chart shows the cumulative daily percentage change in the VIX, not the average daily reading of the index. A potential spike in volatility ahead could bode badly for stocks, which have already experienced volatile trading since October. While Ginsburg said Friday’s big jobs data could temporarily calm markets, he still thinks a downturn is coming. “Friday’s favorable economic data temporarily helped boost action, but we think it was more of a delay in the inevitable,” Ginsburg said. “Historically, the VIX index spikes during elections. “With momentum picking up, multiple sectors have seen healthy pullbacks recently… We think the S&P is overdue for another 3-4% correction.” Traders got a taste of the market’s wild swings last week. The VIX briefly rose above 20 as Iran’s missile attack on Israel made traders worried about escalating conflicts in the Middle East. The index moved back above that level on Monday, which means the index’s history around the election could be repeating itself. The S&P 500 fell 0.3% on the day, and the Nasdaq and Dow Jones Industrial Average also fell 0.3%, giving up some of Friday’s gains. Any hiccups in the market before Election Day would mark a turn after an unusually strong year. Notably, Bespoke Investment Group found that the S&P 500 had its biggest gain since 1997 in the first nine months. The strongest performance.
