Why markets are so volatile right now

A trader works on the floor of the New York Stock Exchange during morning trading on June 11, 2013 in New York City.

Financial markets have been on a bumpy ride recently. The VIX, a widely-used measure of market volatility, has rocketed up nearly 30 percent in a month. Part of what’s moving traders is uncertainty about the Fed’s next moves. But a number of key factors around the world have investors bracing for more sharp peaks and deep valleys.

A quick spin of the globe reveals why, starting in Japan. Stocks have exploded there recently. Until Thursday, that is, when they dramatically flamed out. (They recovered some of the losses in trading Friday.)

“That was simply running faster than the markets really ought to have done, so some sort of correction was probable,” explains economist Andrew Hilton, director of the Centre for the Study of Financial Innovation in London.

Elsewhere on Earth, Europe’s economy is still shaky. That has investors doubting the crisis there has passed.

“The closer they look, the more they realize that it isn’t over,” Hilton adds.

So that’s life in the developed world. Keep whirling that globe and emerging markets large and small come in to view. Investors are dumping these riskier investments for safer bets in America. It all adds up to a market that swings hard, up and down.

Mark Garrison: You can track market volatility, even bet on it, with an index called the VIX. It’s up about 30% in the last month. That means traders expect more sharp peaks and deep valleys. To find out why, we just need to spin the globe. Our finger stops on Japan, where stocks have exploded, until yesterday, when they flamed out.

Andrew Hilton: That was simply running faster than the markets really ought to have done, so some sort of correction was probable.

Economist Andrew Hilton runs the Centre for the Study of Financial Innovation. Elsewhere on Earth, Europe’s economy is still shaky. That has investors doubting the crisis there has passed.

Hilton: The closer they look, the more they realize that it isn’t over.

So that’s life in the developed world. Keep whirling that globe and we’ll pass over emerging markets large and small. Investors are dumping these riskier investments for safer bets in America. Add it all up and you’ve got a market that swings hard, up and down. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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