Fifty Years Ago Volatility Dried Up

We’re currently celebrating the 50th anniversary of the stock market’s historic low for volatility. It’s almost difficult to describe how little stock prices changed each day half a century ago.

From the aftermath of the Kennedy Assassination to mid-1965, the stock market reached its happy calm state. Between December 1, 1963 and June 29, 1965, the biggest daily gain came on May 1, 1964 when the S&P 500 gained just 0.89%. Nowadays, that’s a fairly average move for one day. It’s hard to imagine it was the biggest move for over a year and a half. From December 1, 1963 to June 14, 1965, the biggest daily loss was a 1.25% drop after the Gulf of Tonkin incident.

But if we break down that low volatility period further, the really low part of the low came in early 1964, exactly 50 years ago. For the entire months of February and March, the S&P 500 didn’t have a single daily move, plus or minus, of more than 0.5%. That’s the longest-such stretch in history—43 trading days in a row. The streak was finally broken by an advance of 0.58% on April 2, 1964.

We haven’t even come close to that record. There hasn’t been a 10-day run in 18 years. In late 2002, there was a 37-day run where we always rose or fell by more than 0.5%.

Here’s the S&P 500’s performance over an eight-day period in February 1964:

February 13: -0.06%
February 14: -0.05%
February 17: -0.03%
February 18: +0.01%
February 19: +0.10%
February 20: +0.09%
February 24: +0.08%
February 25: 0.00%

Here are the daily changes for the first quarter of this year:

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Here are the daily changes for the first quarter of 1964, but I used the same scale as above.

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I’d also say that current volatility isn’t that high. We’ve only had a few 1.5% or more days in the last year.

Posted by on March 31st, 2014 at 1:21 pm


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