The index measuring volatility within the S&P 500 hit a peak in March 2020 and remained elevated throughout the rest of the year.
The Chicago Board Options Exchange (CBOE) Volatility Index (Vix), a key measure of stock market volatility, hit a record high of 82.69 in March 2020, and its full-year average of 29.25 was up 90.1% when compared to 2019 — regarded as a relatively low-volatility year. Indeed, other than January, every other month in 2020 saw a higher monthly average than the full-year 2019 average. In total, half of the 10 highest value days for the Vix ever recorded since its creation in 1990 were in March 2020; the rest were in October and November 2008, at the height of the financial crisis.
The Vix, sometimes referred to as ‘the fear index’, measures expectations of price volatility within the S&P 500 stock market index and is widely recognised as a key measure of stock market instability.
The analysis was contained in US trade association Securities Industry and Financial Markets Association’s (Sifma’s) report ‘A look back at 2020 market structure themes: Metrics for equities, ETFs, multi-listed options and capital formation’, published in February 2021. It found that although the overall trend after the March peak was a gradual decline in volatility, the Vix still ended the year 82.4% higher than at the start.
New year, same trend
January 2021 has brought more of the same. Following a stable start to the year, the Vix spiked at 37.21 in the final days of the month, driven by the surge in trading activity around stocks such as GameStop. The overall monthly average for January 2021 was 24.91 — the highest January average since 2016, according to analysis in Sifma’s ‘Spotlight: January market metrics and trends’ report.
Another trend highlighted in Sifma’s full-year report was that the volume of equity capital raised on US markets in 2020 reached $388bn, the highest total since 2000 and a 70.2% increase compared to 2019. The majority of this was accounted for by follow-on offerings, covering 66% of the capital raised. June, May and December were the three most active months by volume of capital raised, at $68.2bn, $57.8bn and $46.5bn respectively.
The boom in the initial public offerings (IPOs) of special purpose acquisition companies (SPACs), which are ‘shell’ companies formed with the specific purpose of raising capital for acquiring another business, appears to have begun in earnest in July 2020, with $11bn being raised via 18 deals. In total, $82.4bn was raised via 248 SPAC IPOs in 2020, compared to $13.5bn via 59 deals in 2019. October 2020 was the busiest month for SPAC IPO activity, with $17.7bn raised via 50 deals. The highest monthly total in 2019 was $1.9bn via 10 deals.
