Despite many investor’s beliefs that Trump’s election made the stock market more volatile, the Chicago Board Options Exchange Volatility Index, the most common method of measuring stock market volaitility, is at a historic low. After the initial shock and panic of Trump winning the presidency, the stock market has calmed as investors realize that their fears are exaggerated. Such low numbers indicate buyers dominate the market, while high numbers mean investors are selling more than buying (i.e. this is the best time to buy stocks).
- Many investors may think the election of Donald Trump injected considerable volatility into the stock market, but it didn’t.
- It is true that he’s firing off Tweets right and left, parading generals named Mad Dog through the halls of Trump Tower and verbally assaulting the nation’s financial gendarmes otherwise known as the Federal Reserve.
- “What this shows is investors have started to calm down,” Luby said. “Maybe they now think their initial fears were worse than reality is going to be.”
“The index is a so-called derivative product — based on options — and the funds that bet on its direction also employ options and futures.”