US Market: Record equity exposure leaves systematic funds exposed to pullback

Recent trading data showed a notable decline in realized volatility across the S&P 500. Both one-month and three-month measures reached multi-month lows earlier this month.

A quieter period for the index

Realized volatility measures the extent of price movement over a specified period. In this case, readings covering the latest one-month and three-month windows both fell to their lowest levels in several months.

The data points to subdued movement in the benchmark US equity index during the periods measured. However, the available information does not identify the factors behind the decline or indicate how long these lower volatility levels may last.

What the data shows

• One-month realized volatility for the S&P 500 reached a multi-month low.
• Three-month realized volatility also reached a multi-month low.
• Both readings were recorded earlier this month.

For now, the key development is the simultaneous decline in both short- and medium-term realized volatility measures for the S&P 500.