The common perception among most traders and investors is that we live in increasingly uncertain times and that the markets are reacting with increased volatility and heightened event risk. Abnormal price swings due to unexpected news, whether it be economic, financial, or political, are said to be now more frequent than in previous years or administrations.
Although this seems intuitively true, we examine two indexes, the and the , and then calculate various volatilty metrics over time to determine this theory’s validity. Subjectively, we defined “historical data” as the period from 01/02/1996 – 12/31/2024 and “recent data” as the period from 01/02/2025 – 02/13/2026.
First, the SPX. If the markets were truly more volatile in the recent 2025/2026 period, then one would expect increased negative moves and more extreme and longer lasting downward spikes. The results are below:
|
Year |
Median Daily Negative Return |
Days Return -3% |
Worst 5-Day Return |
|
1996 |
-0.34% |
1 |
-4.03% |
|
1997 |
-0.62% |
1 |
-8.23% |
|
1998 |
-0.63% |
5 |
-12.03% |
|
1999 |
-0.67% |
-6.63% |
|
|
2000 |
-0.82% |
4 |
-10.54% |
|
2001 |
-0.78% |
4 |
-11.60% |
|
2002 |
-1.03% |
7 |
-11.47% |
|
2003 |
-0.64% |
1 |
-6.02% |
|
2004 |
-0.45% |
-4.16% |
|
|
2005 |
-0.58% |
-3.27% |
|
|
2006 |
-0.38% |
-3.97% |
|
|
2007 |
-0.51% |
1 |
-6.06% |
|
2008 |
-1.28% |
23 |
-18.34% |
|
2009 |
-0.98% |
12 |
-10.10% |
|
2010 |
-0.55% |
5 |
-7.42% |
|
2011 |
-0.81% |
6 |
-13.01% |
|
2012 |
-0.42% |
-4.30% |
|
|
2013 |
-0.37% |
-4.02% |
|
|
2014 |
-0.40% |
-5.40% |
|
|
2015 |
-0.46% |
2 |
-10.94% |
|
2016 |
-0.31% |
1 |
-5.96% |
|
2017 |
-0.17% |
-1.78% |
|
|
2018 |
-0.55% |
5 |
-8.54% |
|
2019 |
-0.35% |
-5.83% |
|
|
2020 |
-0.80% |
16 |
-17.97% |
|
2021 |
-0.46% |
-3.79% |
|
|
2022 |
-0.84% |
8 |
-10.22% |
|
2023 |
-0.48% |
-4.76% |
|
|
2024 |
-0.37% |
-5.85% |
|
|
2025 |
-0.49% |
3 |
-11.54% |
|
2026 |
-0.39% |
-2.59% |
Source: OptionMetrics
As you can see, all three metrics do not display extraordinary volatilty when compared to the rest of the historical series. This is especially true in comparison to the dot.com, financial crisis, and pandemic periods.
Second, we examined similar metrics for the VIX:
|
Year |
Median ABS Change |
Median ABS Positive Change |
Highest VIX Level |
Daily Change > 5 |
|
1996 |
0.540 |
0.510 |
21.99 |
|
|
1997 |
0.630 |
0.540 |
38.2 |
1 |
|
1998 |
0.940 |
1.010 |
45.74 |
3 |
|
1999 |
0.825 |
0.850 |
32.98 |
|
|
2000 |
0.775 |
0.810 |
33.49 |
|
|
2001 |
0.945 |
0.940 |
43.74 |
1 |
|
2002 |
0.980 |
0.940 |
45.08 |
1 |
|
2003 |
0.515 |
0.470 |
34.69 |
|
|
2004 |
0.455 |
0.530 |
21.58 |
|
|
2005 |
0.385 |
0.425 |
17.74 |
|
|
2006 |
0.350 |
0.365 |
23.81 |
|
|
2007 |
0.690 |
0.660 |
31.09 |
3 |
|
2008 |
1.050 |
1.270 |
80.86 |
17 |
|
2009 |
0.975 |
1.150 |
56.65 |
6 |
|
2010 |
0.690 |
0.630 |
45.79 |
7 |
|
2011 |
0.965 |
1.040 |
48 |
8 |
|
2012 |
0.645 |
0.570 |
26.66 |
|
|
2013 |
0.400 |
0.380 |
20.49 |
1 |
|
2014 |
0.550 |
0.650 |
26.25 |
|
|
2015 |
0.920 |
0.930 |
40.74 |
3 |
|
2016 |
0.610 |
0.590 |
28.14 |
1 |
|
2017 |
0.310 |
0.310 |
16.04 |
|
|
2018 |
0.720 |
0.740 |
37.32 |
5 |
|
2019 |
0.640 |
0.595 |
25.45 |
1 |
|
2020 |
1.100 |
1.150 |
82.69 |
12 |
|
2021 |
0.935 |
1.000 |
37.21 |
4 |
|
2022 |
1.040 |
1.090 |
36.45 |
4 |
|
2023 |
0.575 |
0.570 |
26.52 |
|
|
2024 |
0.500 |
0.610 |
38.57 |
3 |
|
2025 |
0.730 |
0.760 |
52.33 |
5 |
|
2026 |
0.595 |
0.595 |
21.77 |
Source: OptionMetrics
The VIX displays more evidence of increased volatilty in the most recent period, especially 2025, than did the SPX using similar metrics. In particular, the highest VIX reading of 2025, 52.33, was only exceeded during the height of the financial crisis and the pandemic. The number of spikes greater than 5 in 2025 also indicates heightened volatilty.
Given all the data we examined, is the market more volatile recently? It’s important to differentiate perceptions of increased volatilty with actual conditions. Given the two time periods reviewed, volatilty in the most recent period is indeed higher, but only marginally so and not to the extent that it can be considered to be historically unique.
In this case, many could be confusing uncertainty with volatilty. As you can see below, economic policy uncertainty has been at record highs since late-2024. However, that doesn’t necessarily mean that volatility is higher, just that overall conditions are more uncertain. The two should not be confused.
Source: https://www.policyuncertainty.com/index.html
***
There is an inherent risk involved with financial decisions. The information in this article is for informational purposes only and is not intended to provide financial advice. Views expressed are those of the author(s) and are not necessarily those of the company.
