Volatility Insanity Returns : 10 Months on

It has been two months since the S&P 500 volatility index (VIX) peaked at 60 but now trades at lows of 17. Within these two months, some trends have emerged and changed the workings of the world. First, every day is a new day. In the past eighty-four days, about thirty days contained some kind of tariff announcement. This has created a gap between what is being perceived and the actual data. 

Second the relationship between bonds and stocks has changed for now. Earlier it was a given that when stocks fall the bond yields will also fall, but this time around this did not happen. The bond yields instead have remained or moved higher. This results in limited safe havens for investors. 

Third, the technical averages of all asset classes have moved differently and have tilted more towards the negative side despite spot prices showing a better view. This would create more rise for large downside moves that might be quick. 

These trends along with others would keep investors, corporates and central banks in an unknown zone. The longer this goes on the deeper the impact as decision fatigue sets in. And within this period any negative news would result in major volatility spikes and pricing rediscovery.