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Market tensions are high as fears of Wall Street volatility creep back into the picture. The U.S. stock market might have bounced back after a rocky start in August, but there’s still a lot of uncertainty under the surface. By Thursday, the S&P 500 had erased all its losses from earlier in the month, and the Vix Index—Wall Street’s favorite tool to measure expected volatility—dropped below its long-term average of 20. Let’s rewind to the beginning of August. A series of disappointing economic reports kicked off a global market sell-off that had everyone panicking. The S&P 500 tanked by 6% within the first three days of trading, and the Vix soared to over 65.  That’s a level of panic we haven’t seen much of in recent history. Even with the recent rebound, the underlying signs aren’t exactly reassuring. Traders watching volatility of volatility Here’s where things get interesting. Traders aren’t just watching the Vix; they’re also keeping an eye on something called the “Vvix,” which measures the expected volatility of the Vix itself.  The Vix, often called Wall Street’s “fear gauge,” gives us an idea of how much investors think the S&P 500 will swing in the next 30 days. But the Vvix? It tells us how volatile that fear might get. As of Friday, the Vvix was sitting at 103.4. To put that into context, the long-term average is about 90, and it was only 83 during the first seven months of the year.  What does this mean? Well, traders are still nervous, even if the stock market’s recent gains suggest otherwise. Consumer staples and healthcare stocks—your classic “defensive” plays—are leading the charge. These are the kinds of stocks people buy when they’re looking for safety, which isn’t exactly a vote of confidence.  But cyclical sectors like consumer discretionary,…

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Filed under: News - @ August 18, 2024 12:16 am