Will Volatility Fall this Week?
Volatility continues to trend lower
Stock market volatility around the globe continued to trend lower as uncertainty about German elections, North Korea, and US tax reforms subsided. Chancellor Angela Merkel managed to keep her position for a fourth term but with support from a coalition government, there was no new aggression from North Korea despite new sanctions from the UN, and US tax reforms saw some light.
Financial markets around the world made impressive gains in September, breaking the usual seasonality of September being the second-worst-performing month of the year. We’ll have to see how this positive momentum continues into the fourth quarter, which has been the best-performing quarter in many recent years.
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US market performance
The S&P 500 index (SPY) managed to record another life-time high, closing at 2,519.36 for the week ending September 29, posting a weekly gain of 0.68%. Similar gains were recorded on the NASDAQ (QQQ) and the Dow Jones Industrial Average Index (DOD), with gains of 1.97% and 0.49%, respectively.
VIX index speculators continue to bet against volatility
The volatility index, VIX (VXX), continued its journey lower as market volatility fell this week. The index closed at 9.51, falling 0.83% last week. As per the latest “Commitment of Traders” report released by the Commodity Futures Trading Commission (or CFTC), large speculators have increased their overall net short positions to 172,395 contracts from 171,187 contracts through Tuesday, September 26. Traders are betting that there could be further declines in the VIX index.
In the rest of this series, we’ll analyze how different asset classes performed last week and discuss the major movers for these asset classes this week.