eResearch | We continue to monitor four indicators to help guide us through the stock market volatility:
- CBOE Volatility Index (VIX)
- S&P 500 Chart of the 2008-2009 Recession with today’s S&P 500 mapped over it.
- S. Coronavirus New Cases
- S. Seasonally Adjusted Weekly Unemployment Claims
During the week, the CBOE Volatility Index (VIX) remained in the “High Volatility” range and the S&P 500 index was up 3% as Unemployment Claims reached over 40 million and daily new Coronavirus remained steady around 20,000.
1) VIX: S&P 500 Market Volatility Index
| This week: 30.5 | Last week: 28.2 | 2 weeks ago: 31.9 | 3 weeks ago: 28.0 |
| Remains in the “High Volatility” range. | |||
| Why it is important: The VIX index measures the market’s expectation for the 30-day forward-looking volatility and is derived from the S&P 500 index options. | |||
| Below 12: Low volatility | 12 to 20: Normal volatility | Above 20: High volatility | |
CHART 1: VIX Index Chart – Year-to-Date – Currently at 30.5 Higher than 28.2 Last Week
The VIX closed the week above 30 as US-China trade tensions re-emerged and protests turned to riots over the death of George Floyd at the hands of police. However, the VIX is still in the “High Volatility” range.
2) S&P 500 Chart
The S&P 500 was up 3.2% last week and closed May up 4.5%, recording its first back-to-back monthly gains since the end of 2019. Although the S&P 500 has recorded gains of over 30% in the past 2 months, it is still down 5.5% year-to-date.
In the chart below, we have overlaid the stock market since October 2019 on top of the stock market during 2008-09 during the financial crisis.
- The S&P 500 was up over 3% last week and closed at 3044, still down 10% from the high of 3386 on February 19.
- At the recent bottom, the S&P 500 was down almost 34% from its peak in February.
- During the 2008-09 Financial Crisis recession, the S&P 500 dropped 53%.
- There are many market pundits still believing the S&P 500 will test the previous lows in March.
CHART 2: Current S&P 500 Index Mapped Over the Chart of the S&P 500 from 2008-2009
3) U.S. Coronavirus New Cases
The U.S. passed 1.8 million cases this week and added another 6,000 deaths to reach over 106,000 deaths.
In the U.S., the number of daily new cases remained firm this week to around 20,000 , however the 7-day moving average continues to trend downward. The peak remains on April 24 with 39,000 new cases.
Although the U.S. continues to be the country with the highest number of coronavirus-related deaths, the data continues to show the U.S. death rate is growing at a decreasing rate, perhaps illustrating that social distancing is reducing the spread. However, we states re-opening in the Memorial Day long weekend, so far, there does not seem to be a jump in the number of new cases.
CHART 3: Daily New Cases of COVID-19 in the United States
4) U.S. Seasonally Adjusted Weekly Unemployment Claims
Last week, 2.1 million Americans applied for unemployment benefits as the widespread layoffs caused by the COVID-19 pandemic crisis continued.
This amount is slightly lower than 2.4 million, from the previous week. Unemployment claims peaked at over 6.8 million during the March 29 – April 4 period.
The recent ten-week total is now over 40 million. The latest job losses has pushed the unemployment rate to 14.7% (May 8), the highest rate since the Great Depression and wipes out all of the job gains since 2000. Analysts Goldman Sachs now estimate that the U.S. unemployment rate could rise to above 25%
As previously noted, some economists expected 15-25 million Americans would likely be laid off or furloughed before the economy recovers from the coronavirus impact and this estimate has now been surpassed.
CHART 4: U.S. Weekly Unemployment Claims
//
