We could summarize the situation by saying that the price of risk insurance is really cheap at the moment. The VIX fell yesterday at 14.66, its lowest annual level and a level that can be described as a low historical point of view. He can always go lower as in 2024 where, for a few days, he evolved between 11 and 12.
The VIX weakness record dates back to 2017 where the VIX fell to 8.7. But a record of weakness which had been followed a few weeks later by an explosion of volatility, an episode of stress nicknamed the “Volmageddon” and which had seen the VIX explode upwards to return very quickly to 50.
Everything seems to slide on the skin of investors in recent days: a report on disappointing employment and instant dismissal of the manager of the statistics office who had followed, the return of the ISM services very close to 50 and therefore at the contraction limit, the American commercial negotiations which are still not adjusted, the daily pressures of the White House on the Fed, the rebound in underlying inflation beyond 3.0%…
This lack of sensitivity of investors at risk also leads to the SP500 on very high levels of valuation, more than 22 times the early benefits.
It would be more “healthy” than the VIX maintains itself for a while in the area which has been its since mid-2010 and which is similar, from a graphic point of view, to a large triangle of consolidation (currently limited between 17 and 55). A consolidation like the “pattern” which had been set up in the first half of 2022.
The first “alerts” of a volatility rebound will appear when the VIX goes back to zone 18-20.