History Rhymes Again

By Joshua Gottfried
April 2018


In September, Equifax, one of three credit monitoring bureaus, reported a massive data breach that as we open our 1st quarter statements in the coming week, the agitation of the stock market will be palpable. This volatility is clearly evident in the daily fluctuations reported over the past month. Many economists and advisors search for its causes, but finding one unifying theory to explain the market’s behavior requires an Einsteinian intellect. Below is a single idea to explain some of the largest fluctuations.  

Last week, while speaking with my colleague Jim DeMartino, I was reminded of one of the human causes often overlooked when searching through economic data. To better understand the concept, below are three graphs:

  1. Volatility Index (VIX) over the past 5 months (11/2017 – 3/2018)

  2. Volatility Index (VIX)11/2016 - 3/2017

  3. Volatility Index (VIX)11/2013 – 3/2014

Remember back to last January? Skeptical new organizations brimmed with anxiety when President Trump replaced President Obama. In February, many of us nervously watched North Korea fire ballistic missiles into the Sea of Japan. Yet investment markets were benign.  Why has the volatility increased much a year later?

When my boys were younger, they sang a Sesame Street favorite: “One of these things is not like the other.” They would sing and look for patterns to find similarities. Review the graph of 2016-17 and of 2013-14 below. Which one doesn’t fit the top pattern of the past 5 months?  To me, comparing the charts of the past two years shows little similarity. (We compared 2015-16 and 2014-15 as well, but found they more similarly matched last year’s chart than what we saw this year.)

On February 3, 2014 Janet Yellen took over as Federal Reserve Chairwoman from Ben Bernanke.  Look at the spike on the graph below and compare it to a similar reaction (above) when Jerome Powell was handed the reigns on February 5, 2018.

To be fair, explaining outcomes is much easier than predicting them. But, the recent volatility reminds us how forcefully the markets react to changes in leadership at the Fed. Let’s hope Powell leads continuing the policies of Janet Yellen.


All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.




November 2017 - March 2018

November 2016 – March 2017

November 2013 – March 2014 (extended through the end of March)