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In a time when there is a lot of fear and uncertainty surrounding political turmoil, geopolitical issues, and tension with North Korea, the market appears remarkably calm. For this week’s chart of the week we take a look at the widely followed CBOE Volatility Index (VIX) which is considered to be the best gauge for expected fear in the markets over the next 30 days. On October 5th, the VIX dropped to a 23-year low closing at 9.19, a number not seen in almost two decades. Leading up to this record close was an impressive eight-day stretch of closes below 10, the longest streak of its history.
Why do the markets seem to be resilient to the ever-concerning news cycle? While impossible to know for certain, speculation includes positive macroeconomic signs, stronger earnings growth, gaining popularity of passive index investing, and complacency of the markets. Although the VIX is well below its historical average of 19, it is worth noting that fear can quickly resurface. In the meantime, it will be interesting to see if further VIX index levels can be achieved which would likely be paired with the markets reaching additional record highs.
The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.
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