Schaeffer's Trading Floor Blog

SPY, VIX, and the Most Boring Quarter Ever

A historical look at the SPY and VIX over the past 10 first quarters

by 4/4/2014 7:35 AM
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Now that the Most Boring Quarter Ever has officially hit the history books, I wanted to see how it looked compared to other first quarters over the past decade. So away we go… Here's a comparison of percentage moves in the SPDR S&P 500 ETF Trust (SPY) vs. how the SPY did for the balance of the calendar year. Also, I included the quarterly close in the CBOE Volatility Index (VIX).

SPY and VIX 1Q Returns since 2004

Well, we're certainly on the mediocre side. That's especially true in comparison to the boom-boom moves in the first quarters of 2012 and 2013. It's also the worst we've done since 2009.

Also noteworthy is how utterly normal it is to see the VIX right here in the mid-teens. The Bear Stearns implosion had just taken place in 2008 (your money wasn't "safe" there, by the way), and the crush had just bottomed in 2009, hence the huge VIX readings. Take those out and you might say VIX spends an awful lot of time in this general range. Just remember that next time you hear someone tell you how cheap VIX looks.

I ran these numbers thinking we'd look just like 2005. It was a pretty non-volatile first quarter on the heels of a couple of good market years. But the table above suggests that 2004 and 2007 are better comps.

If that's the case, then I sure hope we're closer to 2004 than 2007, judging by what happened next. The range in the first quarter of this year (on a closing basis) was 7.63%. Hard to believe, but that's actually higher than the range in the first quarter of 2007 (5.26%) and the range in the first quarter of 2004 (6.22%).

What's more, VIX behaved very similarly in the first quarters of 2004, 2007 and 2014. It hovered in the low teens for the lion's share of the quarter, but each time saw relatively brief overbought VIX spikes.

Now, we're talking all of two data points here, so I don't want to get carried away. Particularly since 2004 saw a relatively happy ending and 3.5 more years of a strong, low-volatility move higher. But timing-wise, we're probably closer to 2007 than 2004. We're five years or so into an uptrend -- about a year longer, in fact, than we were at the end of the first quarter of 2007.

I strongly doubt we see another 2008 next year, but it's possible we're further along in this low-volatility regime than I give it credit for.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

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