Crazy?? No, That’s Just Normal.

This market is crazy! We don’t know what to do—the Administration is nuts; volatility is through the roof! The sky is falling!

The Administration may be nuts (or not)—that’s not my domain. But the notion that we are living in uniquely privileged or ‘interesting times’ reflects our susceptibilities to recency bias, and a certain solipsism that affects us all. It’s sometimes hard to remember that markets have been around a long time and that a lot of bad (and good) things have happened over the years.

What’s the truth of the matter? Maybe not what you think. Are Trump's equity markets the craziest of recent history?

Over long periods of time, the day to day ‘crazy’—as well as the preternaturally benign doldrums that have lulled investors from time to time—come out in the wash.

S&P volatility really is in the high teens. That’s what they teach you in school, and the numbers bear that out.

To put the recent tumult in the proper perspective, I went back as far as I have data, which conveniently is to the start of the first Clinton term—now, shockingly, over 30 years ago! I pulled down daily closing levels for the VIX index—8,000+ of them—and I have some interesting observations to share. If people have equivalent data from further back, I’d love to see a more extensive analysis.

My objective was simply to see if the current Administration is an outlier with respect to causing or at least presiding over especially messy equity markets. (Bond market volatility is a real thing, too. I don’t have the data for that, but I will hazard a guess that the broad conclusions of this article will be borne out if you look at that.)

First, before the reveal—there are a lot of confounders here. There are black swans, there are the car crashes you can’t avoid, there are volatility ‘regimes’—that and more. Black swans are supposed to be unavoidable; so-called self-owns? Maybe not. In any case, no one comes out unscathed. There are no “angels.”

Are Trump’s markets especially nuts? Are Republicans the kings of krazy?

Since Bill Clinton was first inaugurated in January 1993, Democrats have been in power over 5,000 days. Republicans just over 3,200.

Recall: Clinton (D) x 2; Bush (R) x 2; Obama (D) x 2; Trump (R) x 1+; Biden (D) x 1.

We’ve had it all over this time. I’m not even going to recount the various crises and euphorias. There have been plenty.

In any case, it does seem that Democrats have been saner, with an average level of the VIX of 19.23, beating Republicans, which just barely got in under 20, at 19.95. More importantly, how about Trump? Res ipsa loquitur as they say.