And this is currently the case with the 16/17 zone where the VIX index has been evolving since the end of last week after the huge deflation of volatility since April stress peak (the Vix had then reached 60).
When a graphic of the VIX index is “diszooming”, we notice that the hollows of volatility stand up over a period of 12 months. A slightly similar phase had also been observed at the end of 2021 – early 2022, and during this previous phase, the high points of volatility were decreasing. The “break” at the bottom of this “triangle” configuration on the VIX, at the end of 2022, translated the gradual recovery of the upward trend on the SP500 after its drop phase pronounced in 2022.
We are therefore today confronted with two possibilities on the VIX: either volatility rebounds for some time on the SP500, causing a correction/consolidation phase of a few months on the index, also having the effect of relaxing the multiple valuation returned to 22 times the early profits (P/E Forward), which is a high level from a historical point of view (over 10 years, the medium of recovery is 18 times the profits Anticipated)… Either the VIX drives the current 16/17 zone and heads around 10, translating a pursuit of the flight of the index and its valuation … on bubble levels?
Given the number of subjects to which the American markets are faced at the moment (budgetary trajectory, commercial negotiations, macro/consumption slowdown, effect of customs taxes, etc.) A consolidation would probably be the most judicious scenario … to avoid the formation of a bubble.
