How volatile are stock markets really?

Many quote that markets are too volatile for some investors in order to make a case for their products. However, while short-term measures of volatile fluctuate, long-term volatility has been very stable.

Fund managers, analysts and investors are questioning whether markets have entered an era of structurally higher volatility. Looking at the S&P 500 and its development since August seems to confirm this view. After bouncing around 2100 points for half a year, the index began to swing in the range of 1800 and 2100. Volatility seems to be higher at least in the short term, say Marc Goedhart and Darshit Mehta from McKinsey.

However, long-term volatility, as measured over five year intervals, is far below the peaks of 2010, the late 80s or the mid 70s. Today’s long-term volatility is in fact even lower than the 50 year average. While the authors of the McKinsey article “The long and the short of stock-market volatility” admit that peaks and troughs of volatility have been more extreme since the 1990s, they do not see any systematically changes.