The end of the Doldrums?

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Last week the implied S&P 500 volatility (CBOE VIX Index) stayed  below 15%. The VIX had increased to around 17%  a couple of weeks back from 15% levels, on the back of inflation and interest rate concerns.

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During the last 2 years, the VIX has slowly come back to levels similar to these prevailing prior to the onset of the Covid-19 crisis in early 2020. The index was in the mid to low teens range in late 2019 and early 2020.

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S&P 500 Index Skew (CBOE Skew Index) remained little changed last week. It reached its lowest level in the last five years around the beginning of the year and moderately increased in later months.

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Individual stock volatilities also dropped

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Individual stock volatilities decreased in the last two weeks after rising mid month with the VIX.  

The drop was more palpable in high volatility, technology and momentum stocks - all sectors for which implied volatility had spiked in the middle of the month. 

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Volatility could increase in the next few weeks

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Compared to August, seasonally the VIX is usually about 2% higher in September and about 3.5% in October. As the summer comes to an end, liquidity returns and repositioning activity increases. Interest rates and macroeconomic events should continue to drive volatility until the end of September.

 

Once the earnings season kicks off in early October the focus is expected to return to earnings trends and individual companies results.

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