Stocktake: Are calmer times ahead for investors?

The Vix, Wall Street’s so-called fear index, fell below 20 last week, the lowest level since before the pandemic began

Vix readings have historically averaged around 20, and various strategists see sub-20 readings as potentially signalling a transition from a high-volatility regime to a low-volatility one. Photograph:  Getty Images

Vix readings have historically averaged around 20, and various strategists see sub-20 readings as potentially signalling a transition from a high-volatility regime to a low-volatility one. Photograph: Getty Images

 

Stock market volatility continues to decline. The Vix, Wall Street’s so-called fear index, fell below 20 last week – way below last March’s 2020’s record close (82) and the lowest level since before the pandemic began.

Vix readings have historically averaged around 20, and various strategists see sub-20 readings as potentially signalling a transition from a high-volatility regime to a low-volatility one.

Stocks tend to outperform during low-volatility periods, so traders will be closely watching to see if sub-20 readings are sustained.

The Vix briefly fell below 20 at various stages over the last eight months before promptly spiking higher. Will this time be different? Are calmer times ahead?

Maybe not, say JPMorgan strategists, who note that volatility “typically spikes 15-16 months into a bull run”, indicating risky assets may pull back in June or July.

They expect the US to reach herd immunity and for a “major resumption” in economic activity around this period, but investors may well take a sell-the-news attitude; as the last year has shown Wall Street often doesn’t reflect life on Main Street.

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