Why markets really are less certain than they used to be

MARKET commentators and investors often exaggerate the uniqueness of their times. History counts no fewer than 4 “Black Mondays”—echoing the “Black Thursday” that sparked the 1929 Wall Street crash, which heralded the Great Depression—even though the 1987 and 2015 editions rapidly proved unremarkable. Many other days once doused in dark paint have been forgotten. The 25-year period to 2007 looks so boring, in hindsight, that it is dubbed the “Great Moderation”. The ensuing financial crisis did rock markets, but the pattern of hyped but transitory shocks soon resumed—remember the taper tantrum of 2013?

This year there have been plenty of stomach-churning gyrations. Since January the NASDAQ, a tech-heavy stock index, is down by almost 30 per cent. The shocks keep on coming. Just as investors started to worry about stubborn inflation, Russia invaded Ukraine, turbocharging commodity prices and piling more pressure on central banks to crank up interest rates. China is strangling its economy with its zero-Covid policy.

But just how unusual is the turmoil? In order to quantify its uniqueness, this columnist has examined 3 measures of market-related uncertainty: expected asset-price volatility, divergence in economic forecasts and the unpredictability of economic policy as chronicled in the media. The tests suggest we really are living in unusual times.