It has been a month since the Volatility Index ( VIX) of the S&P500 turned insane and rose from level 16 to 65 within three days. This surprised all stakeholders, leading to even statement intervention by a central bank like the Bank of Japan. After a month, VIX stands lower than where it started at 15 similar to the 23rd July close.
Does this mean the storm is over? The answer to it can be trickier than many imagine. Before the VIX broke out Federal Reserve and Bank of Japan met on the same day. This month they meet in the same week along with ECB and BoE. But this month all investors expect the Fed to start with rate cuts and hence this would provide relief to volatility levels especially if incoming data is below estimates.
Another trigger for it was the Israel and Iran proxy escalation. Currently, it is having a controlled impact and as Gaza ceasefire talks enter crucial two weeks the effect will be important.
If these events provide positive outcomes then VIX can hit a low of 10. However, the scheduled debate for the US presidency is on September 10th. US elections are a few weeks away this might result in more volatile moves before the index can settle in a comfort zone.
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