Market fragility lingers as VIX climbs even with U.S. stocks rising to peaks, BofA says

Some buyers appeared more and more nervous in current weeks, reflecting the market’s fragility, whilst main U.S. inventory benchmarks rose to recent new peaks in current weeks, in accordance with BofA International Analysis. 

The Cboe Volatility Index, often called the VIX, has been rising regardless of the S&P 500 index posting new highs, BofA analysts mentioned in an fairness derivatives report Tuesday. The S&P 500
Dow Jones Industrial Common

and Nasdaq Composite

every posted record highs Monday, although they have been buying and selling down Tuesday afternoon.

This chart in BofA’s report reveals the rise of the VIX since early July.

“Regardless of final week’s sharp rebound in large-cap U.S. equities to new all-time highs, volatility markets aren’t sending the identical ‘all clear’ sign,” the analysts mentioned. “Markets stay traditionally fragile in 2021.”

Shares tumbled Monday, July 19, with the Dow seeing its biggest slide since October 2020, however the three main U.S. equities benchmarks went on to ebook positive aspects for the week along with fresh records.

In the meantime, the VIX steadily rose to round 17.5 on July 26 from about 15 on July 2, in accordance with the BofA chart. The VIX

was buying and selling increased Tuesday afternoon, at about 20.3, as shares have been declining, in accordance with FactSet knowledge, eventually test.

“Along with pricing in elevated fragility danger, the VIX market and SPX choices seem more and more involved in regards to the danger of a hawkish flip by the Fed at Jackson Gap” in August, the analysts wrote within the report. The Federal Reserve will likely be gathering for a convention in Jackson Hole, Wyoming on August 26 – 28, with many buyers anticipating a doable announcement on tapering at the moment. 

Learn: How the 10-year Treasury rate and S&P 500 performed when the Fed tapered in 2013

A BofA fund supervisor survey this month discovered buyers anticipate the U.S. central financial institution to announce a tapering of asset purchases both at Jackson Gap or on the Federal Open Market Committee in September, in accordance with the analysis observe. 

In the meantime, the S&P 500 index was buying and selling down about 1% on Tuesday afternoon, opening up one other alternative for buyers to contemplate shopping for the dip.

“The recognition of the “buy-the-dip” phenomenon in U.S. equities continues to rise on the similar time markets are recording close to a document variety of sudden fragility shocks,” the BofA analysts warned of their observe. | Market fragility lingers as VIX climbs even with U.S. shares rising to peaks, BofA says


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