The S&P 500’s volatility increased in 2015. In addition, history says, but does not guarantee, that it will rise even further. In the past 12 months, the S&P 500 has seen daily closing price volatility exceeding 1% 71 times. This count approaches the annual average of 75 since 2000, after starting the year at nearly half that level.
In the past 50 years, it has been fairly common to see volatility rise, especially after the start of rate-tightening cycles. Indeed single-day closing price volatility saw an average 77% jump during the three months after the first in a series of rate hikes since 1967. In the three months prior to the December 16 rate increase, the S&P 500 experienced 21 days of closing price volatility in excess of 1%. History therefore implies that things could get even choppier in the months to come.
Yet this increase in daily volatility has occurred within a very narrow 52-week high-low price range. At 14%, this differential is 8th lowest since WWII. History shows that those years with narrow high-low ranges recorded the worst next-year price performances and frequencies of advance. In other words, 2016 will likely endure increased volatility, but without much in the way of price appreciation to show for it.