On Tuesday as the month of April ended, the S&P 500 underwent its longest?win streak last seen in September 2009. This came on the month’s?1.8% increase.?
For the day, the?S&P 500 increased 3.96 points to set a record-high close at 1,597.57.?According to MarketWatch, health-care companies incurred losses while technology was the top performer from 10 major industry sectors.
The Dow Jones Industrial Average (DJIA) was up?21.05 points to 14,839.80. For the month, it rose 1.8% while the?Nasdaq Composite increased?21.77 points to 3,328.79, closing the month up 1.9%.?
As for the VIX, it closed at 13.52, down 1.39% on Tuesday.?
With stocks on the rise and the Federal Reserve putting money back into the economy, ??Nicolas Colas, chief market strategist at ConvergEx, opined on Tuesday whether the VIX is actually “measuring true volatility” reported MarketWatch.?
In a research note, Colas writes that in 2013, the?VIX hasn?t had a closer higher than its long-run average of 20 and that it ?strains credulity to think that current macro conditions are less volatile than the last three decades.”
So why is the VIX low?
With slow economic growth and recession concerns, Colas thinks that a shift to less ?volatile stocks could be dampening the demand for protective bets.?
He writes, ?If there is less demand for the options-based ?Protection,? which the CBOE VIX Index ultimately tracks, it may well be because low-vol investors already feel hedged by virtue of their allocations.??
Maybe the VIX wasn’t designed to take into account changes and that with?technology taking a bigger role in corporate decision-making, it may cut earnings volatility and subsequently equity markets, he added.?
There’s also the?recession correcting capital misallocation from the housing market, similar to doing so in the 1990s with Internet companies and junk bonds from the 80s, a lot of that capital hasn?t come back. Businesses don’t undergo as many risks, which leads to a decline in stock price volatility.
With these changes making markets quiet, what could spur the VIX back to 2008 numbers?
Colas responded, ?Personally, I believe it could be a large-scale hack of a significant financial institution or government agency. Computer attacks have gone global, after all, and are increasingly state sponsored.?