Never Short A Dull Market?

Never Short A Dull Market?

  • Charlie Bilello

“Never short a dull market.” – Old trading adage

The stock market has become unquestionably dull in recent days. Volumes are down and volatility, as measured by the VIX Index, has plummeted. In the past 4 weeks, this index has declined by over 55%, the largest 4-week decline in history.


At under 12, the VIX is now in the lowest decile of historical readings since its inception in January 1990 (for our latest research on volatility, click here). Had one attempted to short such a “dull” market in the past, how would they have fared?

Not well, as the stock market has historically continued to rise over the next 1-12 months, with a median 12-month return of 10.5% (see first row in table below).


This may not be surprising as it confirms the old adage. What is surprising to many, though, is that shorting markets that aren’t particularly dull isn’t any easier. In fact, the most exciting markets with the highest volatility have historically shown the highest forward returns.

The median 12-month S&P 500 forward return following the highest decile VIX levels (VIX >29.02) was 24.0%. This is well above the median 12-month return for all periods at 12.8% and the 10.5% median return for “dull” markets.

Never short a dull market? Sure. But a more accurate saying based on the historical evidence would actually be: “Never short any market, but be particularly careful shorting an exciting one.”

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.



Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts.  He is the co-author of four award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors and previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

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