October 20th, 2008
10:03 AM GMT
LONDON, England - By the close of trading last Friday, several major markets had gains for the week. But wow, what a ride!
The bank rescue plan announced by governments helped to restore some confidence, but it's clear investors remain incredibly nervous. The volatility has been eye popping, but investors hope to build on the gains.
For anyone invested in these markets, watching it has been a gut-wrenching experience. Let me give you some examples.
Here in Europe, the Dow Jones Stoxx 600 index surged 13 percent in the first two trading days of last week, and then posted its biggest two day fall since 1987. The United States saw a more than 900 point gain for the Dow on October 13 and two days later it crashed more than 700points.
On Friday the S&P 500 swung between losses and gains at least 28 times. It was tenth consecutive session when the S&P had swings of more than 5 percent between the low and the high of the day.
That's much higher than the average this year of 2.2 percent. Last year the daily swings between the high and low was just 1.2 percent and 0.8 percent in 2006, according to Bloomberg. The S&P is now heading for its most volatile October since 1929.
What is this volatility telling us? I think it reflects the incredible uncertainty about the financial health of a number of companies facing what seems to certain be a global recession, and lingering concerns about the banking sector and access to credit.
As I mentioned in my last blog, I don't know if the worst is over for the markets. Opinion remains divided on that.
The economic data remains terrible, and that isn't going to change anytime soon. The question is how much bad economic news is already discounted by investors. The debate over that is adding to market volatility.
Tell me what you think. Do you agree the volatility is going to continue? What's that volatility telling us? How long do you think the volatility could last? Do you have the stomach to buy into these volatile markets?
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