Bryan R Smith/Reuters
- Cboe’s VIX index, commonly known as the stock market’s “fear gauge,” slid to its lowest point since February 26 on Monday.
- The metric measures S&P 500 volatility, and its new level suggests weeks of wild, virus-induced price swings have given way to calmer sessions.
- The index’s downtrend arrived as stock prices staged strong rebounds through April and early May. Volatility-tracking funds have similarly returned to the market as the VIX slides, according to The Wall Street Journal.
- Watch the VIX index update live here.
Wall Street’s preferred volatility index on Monday slid to its lowest point since February 26, indicating the calmest market backdrop since the coronavirus sell-offs began.
Cboe’s VIX index, which measures S&P 500 volatility through options contracts, is commonly viewed as a market “fear gauge.” The metric soared to record highs through March as the coronavirus pandemic and global oil-price war drove outsized volatility. The index then peaked at 83 on March 16 before posting a bumpy decline over the following weeks.
Calming volatility has led more investors to return to the recently frothy market as prices swing higher. Volatility-tracking funds have similarly bought back in as the VIX tumbles, The Wall Street Journal reported Monday.
Even the VIX’s own moves are cooling. An index that tracks VIX volatility on Friday slid to its lowest since early March before ticking slightly higher in Monday’s session.
With state economies reopening, stocks gaining, and economists gaining new insight on the coronavirus’s fallout, experts are now looking to what could startle the steady decline in volatility. A wave of bankruptcies and surging unemployment will spark new sell-offs, Goldman Sachs analysts wrote Friday, projecting the S&P 500 will tank 18% over the next three months.
The upcoming US presidential election also stands to push volatility higher as the virus threat subsides, Kevin Davitt, senior instructor at Cboe’s Options Institute, wrote Wednesday.
“As equity markets found some footing and volatility abated, the VIX futures are once again pricing in more potential US Election risk. This may be a relationship worth watching as we move into summer with party conventions and an emphasis on the general election,” he wrote in a blog post.
The VIX index sat at 27.25 as of 3:05 p.m. ET Monday, up 83% year-to-date.
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