Our Observations: Nearly every market is experiencing short-term volatility (as measured by 22 days) below long term levels, but some volatilities are creeping slightly higher. We think these volatility levels may indicate an end to the sell-off. If short-term volatility levels were to exceed long term, this would likely indicate that sellers have become overly enthusiastic and could present a good entry point into the market.
Market volatility is an indicator of financial stress. Low or declining volatility environments may indicate favorable periods for equity investments, whereas rising volatility periods may favor sovereign debt and developed market currency exposure.