Why has volatility returned to the US equity markets
Why has volatility returned to the US equity markets? The VIX is trading above 20 for just the third time this year. Keep in mind, 20 is the long-term historical average for the fear index, and it's basically the cutoff point for what we consider volatile markets. Yet, equity volatility seems to be climbing in response to crude oil's crash. While you'd expect there to be short-term volatility associated with the unraveling of the energy sector, the overall surge in market volatility is a bit odd. After all, cheap oil is generally a good thing for the global economy, which is in desperate need of a boost. Especially in the US, where the economy is looking stronger by the day, you'd assume a majority of equities will benefit from much cheaper oil prices. In other words, barring some sort of unexpected macro event, I don't expect this current 20-plus level of the VIX to hold. Although, it make take until after the Fed meeting for volatility to collapse.
I'm an investments analyst for a US-based independent investment research firm. My focus is on economics, options, and all types of stocks, but especially tech, Internet, and renewable energy companies. I have experience as a options market...
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