UnitedHealth Group Inc. (UNH), Alcoa Inc (AA) – The Federal Reserve and Volatility: More Bark Than Bite

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If you thought last month was volatile, you were on to something. News that the Federal Reserve could soon reduce its support for the economy sent the Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) barreling up or spiraling down by triple-digit margins in 16 of the month’s 20 trading sessions. But at the end of the day, the reaction to the Fed’s announcement turned out to be far more bark than bite.

UnitedHealth Group Inc

Let me be clear: June was anything but docile for investors. The average daily movement of the Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) was 136 points. This was the highest average since the year 2000, and it handily beat out the runners-up (2012 and 2008), which came in at an average of 115. In addition, as I alluded to, a full 80% of the trading days closed either higher or lower by a triple-digit margin.

Year Average Daily Move (Points) No. of Trading Days No. of Triple-Digit Moves % of Triple-Digit Moves
2013 136 20 16 80%
2012 115 21 9 43%
2008 115 21 11 52%
2002 102 20 12 60%
2010 101 22 10 45%
2000 97 20 10 50%
2011 95 22 9 41%
2006 80 22 6 27%
2007 79 21 7 33%
2001 75 21 7 33%
2009 67 22 5 23%
2003 66 21 5 24%
2004 48 21 1 5%
2005 42 22 4 18%

Source: Yahoo! Finance

If one were to stop here, it’d be tempting to conclude that last month was the most volatile June on record, or at least since the turn of the century. But, as you may have guessed, there’s more to the story.

Take a look at the following table. By these measurements, June was actually a comparatively pedestrian month. Average daily volume was the second lowest in the past 14 years. And it was in the middle of the pack in terms of both the average daily percentage movement and the aggregate change (in absolute points and percentage) between the beginning and the end of the month.

Year Average Daily Volume Average Daily Movement Total Point Movement Total Movement (%)
2006 3,149,845 0.73% (18) (0.16)
2002 2,891,860 1.06% (682) (6.87)
2008 2,528,548 0.94% (1,288) (10.19)
2009 2,510,945 0.78% (53) (0.63)
2007 2,489,343 0.59% (219) (1.61)
2003 2,375,167 0.73% 135 1.53
2001 2,326,814 0.69% (410) (3.75)
2005 2,283,355 0.40% (193) (1.84)
2010 2,246,218 1.00% (363) (3.58)
2004 1,957,671 0.46% 247 2.42
2011 1,762,027 0.79% (155) (1.24)
2000 1,726,040 0.91% (74) (0.71)
2013 1,494,224 0.91% (206) (1.36)
2012 1,422,186 0.92% 487 3.93

Source: Yahoo! Finance.

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