By Scott Tzu
The military coup that was reported in Turkey last night should be reason for concern on numerous levels. First, it is the first NATO-sponsored entity to ever have an attempted military coup. Second, it highlights a growing civil unrest across numerous geographies worldwide. Third, it should act as a stark reminder to investors and the public that sometimes, the unexpected simply does happen.
One of the most interesting concepts behind the stock market and the psychology of the stock market is dealing with the unexpected. It is what can make stocks jump wildly and it is what can make stocks swing to lows and crash. Volatility and the unexpected are undoubtedly not the friend of the stock market. In the case of the last two weeks, we have seen what shock to the upside looks like. In Turkey (and in Nice), we just got a stark reminder that the world isn’t sunshine and rainbows all of the time.
This is why commentators spend most of their day watching the VIX. They are trying to gauge the market’s sentiment or “fear” looking forward. Does the market expect volatility? This is important to know