In my role at Vanguard, I’m often asked to speak to groups of clients. Invariably, they’ll ask about my outlook for some segment of the market. I often joke that my crystal ball has been cloudy of late.

You see, at Vanguard, we’re not into making short-term market predictions. We believe that if you stick to the tried-and-true principles of maintaining a low-cost, balanced, diversified portfolio that’s aligned with your long-term goals, you’ll give yourself the best chance for investment success.

The philosophy may not grab headlines that often feature provocative, bold market speculations, but it’s a sound approach.

One thing that my crystal ball is clear on, however, is the notion that when market volatility ultimately returns, ETFs will be blamed. How can I be sure? It’s happened too many times to count.


Historically low volatility

I’m a numbers guy. When I hear a piece of information, I want to see the proof to back it up.

So, what does the data say? Are ETFs a source of volatility? I wrote about this subject back in 20131, and my colleague Joel Dickson briefly touched on it in his most recent blog post. I think it’s worth revisiting the topic to reinforce my point.

At the time I’m writing this, we’ve gone 50 consecutive trading days (December 7, 2016, through February 21, 2017) in which the S&P 500 has fluctuated less than 1%. Before that we saw a period of 43 consecutive trading days in 2016.

As you can see by the chart below, this is historically low volatility!


Volatility this low is rare

S&P 500 Volatility Chart

Source: Vanguard


What volatility?

Over the past decade, ETFs have become enormously popular among advisors for their use in building investment portfolios. Although sometimes portrayed as unique instruments, ETFs are similar to mutual funds from both a regulatory and a structural standpoint2.

All of our research shows that when volatility does spike the primary culprit is global macro events.

The next time I hear someone attribute market volatility to ETFs, I have my response ready.

“Sounds like ‘alternative facts’ to me!”



1 Fran Kinniry, 2013. Vanguard: Where’s the volatility? Accessed February 21, 2017, at

2 There may be other material differences between products that must be considered prior to investing.



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