Markets may soon lose their docile and tranquil nature. Risk factors are surfacing yet again, with CBOE Volatility Index (VIX) closing highest level in 2017 in March 23. The VIX also spiked above the 200 days long moving average, presently at 13.54 on March 24 for the maiden time since December 2016. The VIX is colloquially known as a fear gauge by Wall Street. It is now slowly moving towards long term average. This suggests that there could be firmer attempt at breakout.
Choppy markets ahead
It is to be noted, however, that the VIX continues to be much below 20, its historical average. The gauge is a sign of how much money the investors can pay for their protection for the future's 30 days in future. There could be widely varying prices in Standard & Poor 500 Index. The lower levels of the implied volatility may signal complacency to a few people. Higher readings are usually a sign of higher anxiety and that the market could face a choppy future.
The VIX, during the fourth week of March, went up by 15 percent. As per FactSet data, this marked its sharpest rise from the 22.7 percent jump in the week that ended on December 30, 2016. There are reasons to believe that the markets may soon enter choppier times . The certainty of this happening increased after the DJIA or Dow Jones Industrial Average and Standard & Poor 500 went on 109 days of trading without a single point drop only to break the next day. As per data collected from Dow Jones, the stock market was on the road to create its lengthiest streak of depressed days- for consecutive eight days, from August 2, 2011.
End of Trump honeymoon
The last four months saw Wall Street express trust on President Donald Trump. Traders bet that the pro-growth promises made by the newly minted president during his campaign trail will be brought to fruition. The list of proposals include tax cuts, deregulation and infrastructure spending. It is to be noted that as stocks go up, the VIX goes down. It is thus a common sight to index trades going a little higher as stocks make a retreat. One thing is apparent though: the euphoria about Trump becoming the President of the US is wearing off. Both the S&P 500 and the Dow all set to make their maiden monthly losses since October 2016.