ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Alternatives Channel
      • Artificial Intelligence
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Education
      • ETF Investing
      • ETF Strategist
      • Faith-Based Investing
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Invest Beyond Cash
      • Leveraged & Inverse
      • Modern Alpha
      • Portfolio Strategies
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Gold/Silver/Critical Materials
        • Crypytocurrency
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
    • Market Outlook
    • Crypto ETF Hub
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Database Categories
    • Indexes
    • Scenario Analysis
    • Watchlists
    • Head-To-Head ETF Comparison Tool
    • Mutual Fund To ETF Converter
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • Gaining Perspective Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETF Strategist Channel
  2. Will Lower Volatility Mean Higher Stock Prices?
ETF Strategist Channel
Share

Will Lower Volatility Mean Higher Stock Prices?

Horizon Investments   May 12, 2023
2023-05-12

Some key trends could bring good news.

Investors seem to be a relatively calm, cool, and collected bunch these days—which may be a harbinger of stock market strength in the coming months.

Consider some recent signs of low market volatility that we have been monitoring:

  1. The S&P 500 Daily Risk Control 10% Index is an index that’s designed to increase its exposure to the S&P 500 Index as market volatility falls. Today, this index is 66% invested in the S&P 500 Index—more than double the 31% allocation seen last November (see the chart). Moreover, the last time the index’s equity exposure hit the mid-60s was in early 2022.
  2. The stock market’s “fear index”—the Chicago Board Options Exchange’s CBOE Volatility Index (VIX), which measures the 30-day expected volatility of the U.S. stock market—was at 15.78 on 04/28/23, the lowest level since October 2021.
Will Lower Volatility Mean Higher Stock Prices?

If the stock market were a big lake, the surface would appear calm and still today. Of course, plenty of action is occurring below the waterline—such as sharply diverging returns among big banks versus regional banks. But up above, it looks like pretty smooth sailing.

This placidness has potentially significant implications for portfolios. Quantitative investors look for data-driven indicators such as low and falling volatility to tell them it’s time to buy equities. If current conditions persist or we see less restrictive Fed policy, these investors will likely support equity prices. Conversely, they may exit stocks quickly if volatility spikes, putting downward pressure on prices.

As always, we will continue to monitor key quantitative and qualitative factors for indications of the market’s direction as well as opportunities to pursue and risks to mitigate.

For more news, information, and analysis, visit the ETF Strategist Channel.


Content continues below advertisement

This commentary is written by Horizon Investments’ asset management team. 

Past performance is not indicative of future results. 

The Chicago Board Options Exchange’s CBOE Volatility Index (VIX) is a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. The S&P 500 Index is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The S&P 500 Average Daily Risk Control 10% USD Price Return Index seeks to limit the volatility of the S&P 500 to a target level of 10% by allocating to cash. You cannot invest directly in an index. 

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.

The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money. 

Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation. 

This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.

Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. An index’s composition may not reflect how a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Individuals cannot invest directly in any index.

Other disclosure information is available at www.horizoninvestments.com.

Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC

©2023 Horizon Investments LLC

 

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2025 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X