Does it feel like there’s a lot more action in the stock market this year compared with 2017? It should.
Even though the U.S. stock market is still in its first quarter, with one week left to go until 2018 is 25% over, it has already seen far more volatility than occurred over all of last year. In fact, the first three months of the year have seen more than twice as many sharp gyrations—in both directions—as was seen during 2017, which was an atypically quiet year for equities.
Thus far this year, the Dow Jones Industrial Average DJIA, +2.84% has had 11 sessions when it rose by at least 1%, including Monday, in addition to another 12 where it fell by at least that much. While swings of that magnitude are hardly uncommon on Wall Street, they represent a profound change from the trading environment of 2017, when there were only 10 such sessions — in both directions — seen over the course of the year.
In other words, the number of sessions with a 1% move so far in 2018 are more than double 2017’s tally, and it isn’t even April.
A similar trend holds for the S&P 500 SPX, +2.72% which has had 11 days with a 1% rise and 10 with a 1% drop, making for a total of 21. There were just eight such sessions in 2017; the benchmark index matched last year’s total in mid-February.
The Nasdaq Composite Index COMP, +3.26% like the Dow, has also seen 23 sessions with a 1% move. Most of the moves have been to the upside, with 14 sessions with a 1% gain and nine with a 1% decline.
However, the Nasdaq is still lagging a bit behind last year’s total, when there were 25 sessions with a 1% move, including 10 negative days and 15 positive sessions. In both years, the Nasdaq has seen outsize swings thanks to its heavy concentration of large-capitalization technology and internet companies, like Amazon.com AMZN, +4.03% and Facebook Inc. FB, +0.42% —both of which have been primary drivers of the index’s moves.
Last year, the entire Nasdaq was lifted by a rally in the so-called FAANG names, which refers to five large-cap stocks—Facebook, Amazon, Apple Inc. AAPL, +4.75% Netflix Inc. NFLX, +6.45% and Google parent Alphabet Inc. GOOG, +3.10% —that emerged as trading favorites. While Amazon has extended that strength in 2018, rising 33% year to date, Facebook has struggled, and is now down more than 9% for 2018. The stock has fallen into bear-market territory in the fallout from a scandal over how it has handled user data.
When it comes to more pronounced single-day moves, 2018 is leagues beyond last year. Neither the Dow nor the S&P 500 had any session that ended with a 2% move in either direction last year. So far this year, however, the Dow has had six such sessions (four to the downside, including two days where it fell more than 4%), as has the S&P (one session with a 2% gain and five 2% declines).
The Nasdaq had three 2% moves in 2017 (two 2% drops and one 2% gain), but it has also had six so far this year — two to the upside, and four to the downside.
On Monday, both the Dow and the S&P jumped more than 2%, while the Nasdaq ended 3.3% higher. For all three, it was their best one-day percentage gain since August 2015.
The increased volatility in 2018 is due to a number of factors. There was heavy volatility in early February—resulting in the first correction for the Dow and S&P 500 in about two years—after data indicated inflation could be returning to markets, which raised the specter of the Federal Reserve becoming more aggressive in raising interest rates.
Subsequently, markets have grown concerned about the prospect of protectionist trade policies after President Donald Trump surprised markets by announcing tariffs.
The Cboe Volatility Index VIX, -3.14% has gained more than 90% so far this year, and last traded at 21.03, above its long-term average of 20. The VIX, which uses S&P 500 options to calculate expectations for volatility over the coming 30 days, has seen multiple sessions with extremely sharp moves.
According to data from the WSJ Market Data Group, the so-called “fear index” has experienced six sessions this year that saw a jumped of least 20%, along with one day that saw a 20% drop. Notably, volatility more than doubled on Feb. 5, amid the start of a steep selloff in the U.S. stock market spurred by inflation concerns.
Read more: There’s been a historic amount of earthshaking stock-market volatility this year