17384490_MOne important thing to remember when it comes to the stock market is to prepare for a rollercoaster ride. And that’s definitely been true in the last 12 months or so. It seems, though, that in the first few months of spring, the stock market is showing signs of a rise, according to many economists.

There have already been record highs this year on Wall Street. According to an article on Business Insider, that may be in part due to the vaccinations beginning around the world to stem the COVID-19 virus. Add to that the recently approved $5 trillion aid package passed by Congress, and it seems like a rallying market would be in sight for a while.

And yet, not everyone thinks that’s going to be the case. The Business Insider article notes that UBS —a bank in Switzerland that’s considered the world’s largest wealth manager — published a recent note which predicts “periodic bouts of higher volatility” throughout the year.

Very cautious optimism

Part of this tempered view of the stock market on a high stems from the CBOE Volatility Index, also known as the VIX. Created by the Chicago Board Options Exchange, according to Investopedia, it is meant to show expectations for how fast prices can change in stock trading, and they are tied to prices of index options.

To that end, UBS cited in its report that a single investor bought $40 million in VIX call options, a sign that the spring months and into summer may see more fluctuations in price. This, despite the fact that the VIX level dropped to 17 points, its lowest point since February 2020. Reuters reported, though, that other investors are predicting the VIX to climb between the 25 and 40 marks in the next few months.

So, what could be causing these feelings of volatility? There are several factors cited in the Business Insider story.

Will there be inflation?
This is a big question that is starting to be posed by experts and economists in the press, as increased economic demand runs into possible supply concerns. The Fed is targeting inflation at 2%, but others are forecasting a greater increase.

What about the new strains of COVID-19?
Stakeholders in various economic sectors are also concerned about the variants of the virus, and that might be one reason why there is an unsettled feeling economically.

Is the rise here to stay?
UBS writes in its note that institutional and retail activity in the options market is more responsible for the “sporadically heightened” market in the past few months, along with the increase in major equity indexes’ growth stocks. While that activity took most of the market with it, UBS doesn’t believe it’s a trend with legs.

While it’s clear that all of this is speculation, it would be wise for investors to always proceed with focus when it comes to investing, and to watch stocks closely. As an attorney that specializes in securities law and regulations, we can help any questions you may have as your continue to look over your portfolio during the economic recovery. You can learn more about what we have to offer at our website.