Last week the most popular volatility index, the VIX, went briefly below 15% for the first time since the 20th February 2020, before the spike in volatility triggered by the fears of the pandemic.
Broader equity market indices, like the S&P 500 and the EuroStoxx are above (significantly above in the case of the S&P 500) their pre-pandemic-peak levels.
Since we humans are very prone to look for and see patterns, even when there are none, I won’t compare the pattern since 2020 to those in the past, for a cue on what volatility may do in the coming months. That said, the divergence between technical indicators and economic fundamentals can be interesting sometimes.
Is the low in the VIX a symptom of the capitulation of equity bears?
The volatility index seems rather unimpressed by the Covid Delta (and other) variant, valuation multiples, and certain macroeconomic fundamentals like debt trajectories. Should we or should we not?