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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
The VIX stands at a quiet 13, comfortably below its 30-plus-year mean of 19.7 and pre-pandemic levels. In contrast, the MOVE index, at 129, is about 120% over its long-term norm, having climbed 17.5% since November 23.
Rates and currency markets have outpaced equities in volatility this year, posing the question of today’s bonus chart: Which will adjust — will equities see a surge in volatility, bringing the SPX down to align with the MOVE's ascent, or will Treasury volatility ease as the bond market benefits from end-of-year rebalancing?
The curve's shorter end has found some equilibrium, there is room for a little more downside, though not due to anticipations of further rate reductions. The Fed’s stance is steadfast on maintaining higher rates for the foreseeable future — this is the new status quo. Higher for longer is not a drill. Given this, there’s a reasonable argument that the SPX will retrace part of its November gains, potentially bridging the gap displayed in the chart's "alligator jaws."
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
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