VIX Up 2% as US Equities Tumble Amid Increased Volatility
VIX is up over 2% Wednesday as US equities slide. The VIX hit 22.91 at one point, its highest level in more than two weeks.
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US stock market volatility measure VIX surged Wednesday, at one point going as high as 22.91, the highest level in more than two weeks. Meanwhile, the US stock market indices are all down, with S&P 500, DJIA, and Nasdaq Composite tumbling 0.25%, 0.19%, and 0.61%, respectively.
Benchmark US Stock Indexes in the Red
Cboe volatility index (VIX) is up more than 2% Wednesday. The index currently stands at 22.48. The jump takes the index to a somewhat elevated level as the index has frequently traded below 15 in the era after the financial crisis. However, the current level is close to the index’s low for the second half of 2022 as VIX has surged past the 30 mark several times this year.
Meanwhile, the US stock market opened red, with the S&P 500 and Dow Jones Industrial Average (DJIA) down 0.18% and 0.14%, respectively. The Nasdaq Composite has tumbled even lower, down 0.95% in the past 24 hours.
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Markets Yet to Witness a “Volatility Spike” That Would Mark ‘the Bottom,” Analyst Says
However, Evercore strategist Julian Emanuel said, “there has yet to be a volatility spike which would give us confidence in calling ‘the bottom’” during the prolonged market downturn this year. This suggests that volatility could be too low given the circumstances, as VIX has normally spiked to higher levels during previous times of crisis and sell-offs.
Meanwhile, stocks, crypto, and other riskier assets are trading at significant discounts due to harsh macroeconomic conditions involving record-high inflation and interest rates. But inflationary pressures in the US have slightly eased in October. According to the latest consumer price index (CPI) print, inflation fell to 7.7% last month, down from 9.1% in June.
This has allowed investors to catch their breath for a moment amid hopes of slower interest rate hikes in the future. Federal Reserve Chairman Jerome Powell said the December interest rate increase is expected to be smaller than the four consecutive 75 basis points hikes in the past four months. He said it “makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
Do you think stock market volatility will increase as the Fed slows the rate hikes? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
