VTS Volatility Barometer levels per year since 2011

VTS Community,

My VTS Volatility Barometer goes back to inception in January 2011.  The methodology has changed a little bit over time with new Volatility metrics being added when necessary, but in general it's always been based on the same concept.

Any individual Volatility metric will only ever be instructive on a select portion of the overall market. 

If it's a VIX futures related metric that's great, but by definition it'll be missing all the index and Options related data.  If it's a VIX style metric like the VIX:VIX3M medium crossover for example, again very robust but it's missing a large chunk of market participation elsewhere.

Only by combining many different Volatility metrics together can we get the best overall picture of what market participants are up to. 

The current VTS Volatility Barometer is combining 13 different metrics into a single index that is the best representation of true market Volatility you'll find anywhere.  It's often copied and plagiarized  (they say imitation is the best form of flattery)  but the original was from me and I've been using it to great results for well over a decade now.

VTS Volatility Barometer levels by year

Given the length of time that I've been using the Volatility Barometer, it's actually pretty tough to look at on a long term chart.  It's hard to parse through and find specific moments in time.  

Today we can take a look at each individual year and I've included some extra data for each chart.  The average level for the year, plus the percentage of trading days the Volatility Barometer spent in the lower, middle and upper 1/3 percentile ranges.

-  Lower values represent stable markets where our strategies will be allocated to aggressive net long equities / net short Volatility positions.

-  Higher values represent periods of elevated Volatility where our strategies will be in safety positions.

-  Extreme values over 80% would be times that our strategies may in fact be taking net short equity / net long Volatility positions to capitalize from an extended market crash.

Since January 2011 we can see the average level was 46.34%.  Now you might be wondering, if this is all based on percentiles why isn't it 50%?  Well, it's because the individual data points are being used for as far back as we can go, often times to 2004 and a few metrics even further back than that.  This means that the stable market in the early to mid 2000's, plus the extreme levels in financial crisis are being used, but our official values start in 2011.

It's natural to expect that during this extended bull market post GFC in 2008, that we would see slightly calmer levels overall.  This of course will not always be the case, but it's good to have as much data as possible which is why I include as far back as I can go.

Overall this means we have data from the bull market in the early to mid 2000's plus the most recent bull market from 2009 through to whatever date you want to assign.  Plus we are using the Financial Crisis in 2008, European Debt crisis in 2011, the China hard landing scare in 2015, Volpocalyse in 2018, the Q4 2018 bear market, the 2020 pandemic, the bizarre year that was 2022, and the most recent shock Volatility spike in 2024.

We have a very robust data set at this point which just makes the Volatility Barometer even stronger.

-  The Volatility Barometer has spent 18.20% of trading days in the upper range, which largely coincides with the amount of time our strategies spend in safety.  Each strategy is geared with different thresholds, but overall this is a good rough estimation.

-  The Volatility Barometer has spend 30.40% of trading days in the lower 1/3 of values.  This is a time where short Volatility in particular would be a good performer.  As you'll see later, post 2018 Volpocalypse we didn't see as much time spent in the lower ranges.  That will return of course, especially after the next recession we will want to get very aggressive again on the other side of the crisis.

-  We will also be looking to take full advantage of the next market crash itself by shifting to our net short equities / net long Volatility positions when the Volatility Barometer eventually spends significant amount of time in the 80% and higher range like it would have in the 07/08 period.

Snapshot of each individual year

* I'll do an extended video in the future breaking down each individual year further and talking about what events caused those types of readings.  In blog form it would be FAR too long for you to read through.  Today, let's just view each chart and have that as a reference on the website.  More colour commentary will be coming with videos and livestreams...