Our Observations: Volatility increased in nearly every asset class as near-term volatility approached long-term volatility. Rising volatility tends to indicate a riskier environment for stocks and commodities, so we think this data adds to the consideration of a possible correction. We think it is prudent to keep an eye on volatility as extreme numbers could indicate an opportunity. However, at this point, there are still only a few extreme levels.
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.