Trying to predict “when” and “why” is futile…

Changes in volatility usually portend changes in market direction. Some things will never change.

Last month, the VIX began to shake off the complacency we had come to expect. Should I remind you that expectations and markets are not well correlated? Beginning the breakout of a range that had been in place since last August, a rally in the volatility indicator moved from a low of around 8.50 to this morning’s print above 18.

A lot of factors could be the culprit. TV intellects and technicians like talking about mean reversion, highlighting that a correction is long overdue. They may be right, but I scratch my head when I hear this kind of rhetoric. What they are trying to say is that they’re hoping for the market to pull back, so they can put money to work at better prices. They’ve missed the rally and are now remorseful because of their overconfidence. But a market is not beholden to anyone’s calendar, opinion or chart as it pertains to where it should price each day. Random in its movement, a market reflects the consensus of all the participants who collectively bring their biases and behavioral quirks to the marketplace. Most of these are irrational and extremely difficult to exploit. Ackman comes to mind.

Rallies and corrections are the substance of markets but trying to predict the “when” and “why” is futile. It is better to remain disciplined in your efforts to choose sound investments that can generate acceptable returns over the long term. Everything else is just noise.

LaSalle St. Investment Advisors, LLC
940 N. Industrial Dr.
Elmhurst, IL 60126