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The Stock Market: Now More Volatile Than Ever!

Peter Gorenstein

If the market seems more volatile than ever that's because, based on many metrics, it is!

Today's Wall Street Journal has the stats:

  • The Dow's average daily move of 1.7% since August began is twice the decade's average.

  • Seven moves of more than 3% since August began.

  • Moves of more than 1% on 33 of past 49 trading days.

Ed Dempsey CIO of Pension Partners, a manager of pension funds based in New York City, says he's never seen anything like this in his three decades on Wall Street. "I have not seen (volatility like this) and I started in the crash of '87," he says.

In the accompanying interview with Aaron Task, Dempsey says the wild swings are a result of advances in technology. "You have so much information that is so unfiltered, but the key is that it's so actionable," he observes. "Now anywhere in the world where you are you can take out your smartphone and you can act on the news."

The WSJ says all this volatility is detrimental to the markets. After all, the Dow is down 13% since its April high (not counting today's rally, which itself is a sign of volatility). Plus, the swings scare off individual investors, leaving only the big players on the field. The good news, according to Dempsey is that the worst is behind us, at least for now. He's predicting a major stock rally to begin very soon, if it hasn't already. (See: After Predicting the "Summer Swoon," Ed Dempsey Now Sees a "Fall Melt-Up)

Some blame the added volatility, not only in recent months but the last few years, on the growth of high frequency trading, which according to some, accounts for 50% of U.S. trading volume each day. Regulators in the U.S. and Europe are looking into ways to curb high-frequency trading and/or learn more about their activities. Dempsey thinks that's a good idea. "Like most things with the markets, people are ahead of the rules and regulations. Rules and regulations absolutely need to catch up."