Volatility: liability to change rapidly and unpredictably, especially for the worse.
Otherwise known as the Fear Index when applied to the S&P 500, volatility is defined in finance as the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. A measurement of violent price movements in a given asset, volatility correlates with and causes tectonic shifts across the Global Economy.
When investors are fearful, their actions tend to become erratic and illogical. While there is a maniacal focus on S&P 500 Volatility, a powerful metric of Global Uncertainty can be measured across Foreign Exchange volatility. Currency volatility can indicate turbulence and uncertainty in a given country, and the general world economy. Sometimes the trigger can be as simple as an erratic big fish swimming in a shallow pool of liquidity; Such as in the case of the AUDUSD and USDJPY flash crash of January 2019, which followed the S&P 500’s worst decline in a decade.
As a corollary for uncertainty, volatility can indicate and exacerbate financial meltdown and erode faith in an country’s economy. More importantly, such violent price moves can negatively affect the lives of millions of people and businesses within such an economy…
