If you looked only at annualised realised volatility across large-cap US equities this year, you would conclude that 2026 has been quiet. That average conceals the actual character of the year, which is long stretches of unusually compressed daily ranges punctuated by gaps that would have been three-standard-deviation events a decade ago. The mean is calm. The distribution is not.
The first measurement worth watching is the ratio of overnight to intraday variance. Across our large-cap sample, roughly 58% of total variance now arrives outside the regular session, against a long-run figure closer to 42%. For anyone running intraday systems, that is a structural tax: the move you were positioned for increasingly happens while you are flat, and the session you actually trade is the quieter remainder.
The second is range compression measured as the proportion of sessions whose true range sits below half their own 20-day average. That proportion has run near 31% this year. Squeeze-style strategies are built for precisely this environment, which is why they have looked good, and why their published statistics deserve a suspicious eye — a strategy that only prints while ranges are compressed has an implicit regime bet inside it.
The third is dispersion. Index-level volatility has been low while single-name dispersion has been high, which is the classic signature of a rotational rather than directional market. Pairs and relative-value approaches feed on exactly this. Trend systems applied at the index level starve on it, then get run over when the rotation resolves into a directional move.
The fourth is autocorrelation of absolute returns, which is simply a formal way of asking whether volatility clusters. It does, and this year more than usual: a large-range day is materially more likely than baseline to be followed by another. That argues for volatility-scaled position sizing over fixed sizing, because fixed sizing quietly hands you your largest risk exactly when the market is least willing to absorb it.
None of this is a forecast, and none of it should be traded directly. The practical takeaway is narrower: if your research window is the last eighteen months, you have fitted to a compressed, rotational, gap-heavy regime. Test the same rules on 2018, on 2020 and on 2022 before you conclude the edge is structural rather than seasonal.
Mara Vestergaard
Head of Quant Research
Writes for AlgoBeam on research. Every figure quoted above can be reproduced in the backtester with the same settings.