One of the most remarkable characteristics of the '08/'09 market crash was the daily volatility that occurred. On December 8th, the average absolute daily change of the S&P 500 over the last 50 days reached a record 4.02%! With the entire US stock market gaining or losing 4% to 5% of its total value on a daily basis for two months, how did any of us stay sane?
Since peaking late last year, however, the average daily change for the market has cratered. As shown below, over the last 50 days, the average absolute daily change for the S&P 500 is now under 1% at 0.87%. This is the lowest level since July 23rd of last year. Markets fall much faster than they rise, so it's no surprise that this number has gone down significantly as the S&P has risen 52% off of its lows. But many investors also believe that the 2x and 3x long and short ETFs played a role in the huge price swings that we saw. Going forward, we wonder what impact the banning of leveraged and inverse ETFs by brokerages will have on market volatility.
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