Volatility is usually expressed as the annualized standard deviation in a stock's return. That translates to the degree of variance—up or down—from a stock's average price over a given period. If all you could know about a stock was this number, you might easily dismiss an investment as too risky. There is a metric that incorporates a stock’s return with its volatility to give you a sense of the issue's risk-adjusted return.
Jonathan Barratt, managing director of Commodity Broking Services, said “This is end-of-year optimism confronting fundamentals and it's the optimism that is carrying the day. But there's a holy hand grenade of potential troubles out there for next year.”
According to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, yields on benchmark 10-year notes will climb about 40% to 5.5%, the biggest annual increase since 1999. The surge will push interest rates on 30-year fixed mortgages to 7.5% to 8%, almost the highest in a decade, Greenlaw said.