INVESTMENT UPDATE

Chart of the month: How the Coronavirus is influencing share prices

  • 06 March 2020
  • 5 minutes

Coronavirus worries

The Volatility Index (the "VIX") provides an indication about how uncertain investors and traders are about the coming 30 days. As the spike at the very right-hand end of the chart shows, investors appear to be worried about the implications of the Coronavirus.

How the VIX is compiled

The VIX is a collation of the prices that investors are paying to buy a form of insurance against stock price falls, specifically, options on the S&P 500 Index. The more nervous investors are about the short-term future, the more they are likely to pay for these options. The VIX shows a number between 0 and 100 reflecting the prevailing average price being paid. When the outlook doesn't provide too much to worry about, the VIX tends to stay below 15. By the end of January, the VIX was trading at around 18. Over recent years, spikes in the VIX have been caused by slowing economic growth, the trade spat between China and the US, and potential conflicts such as might come about from souring relations between the US and Iran. Coronavirus hasn't pushed worries that high yet, but it has caused some concern for the short-term.

Forecasts of future performance are not a reliable guide to actual results in the future; neither is past performance a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise and cannot be guaranteed and the investor might not get back their initial investment,

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