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Why Was VIX Index Down 16% Last Week?

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Updated

Are investors still worried about North Korea?

The recent trends of ups and downs in volatility continued in the week ending September 15. After a 20% surge in volatility in the week of September 4, volatility in the global markets dropped as the markets opened on September 11. During the week, North Korea fired another missile over Japanese territory, but it doesn’t seem that these tests are bothering markets anymore.

There were a few positive developments in the US that boosted market sentiment. President Trump signaled tax cuts, and house speaker Paul Ryan set a deadline for the end of September for the publication of first drafts on tax reforms. The other positive news was the surprise jump in US inflation for August. The headline inflation was reported at 1.9%.

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US market performance

In the week ending September 15, the S&P 500 Index (SPY) closed above 2,500 for the first time in history with a 1.6% rise during the week. The tech-heavy NASDAQ (QQQ) closed 1.4% higher, while the Dow Jones Industrial Average Index (DOD) recorded gains of 2.2% for the week ending September 15. The US dollar (UUP) rose from its lows, and the bond (BND) yields rebounded as rate hike hopes were rekindled after an impressive August inflation print.

VIX Index speculator bets continue to drop

The VIX Index (VXX) returned to its lows, closing at 10.2, a 16.1% fall for the week ending September 15. As per the latest Commitment of Trader’s report from the Commodity Futures Trading Commission, large speculators have increased their overall net short positions to 123,827 contracts from 121,328 contracts through Tuesday, September 12. The FOMC statement on September 20 is the only major risk event for the markets this week.

In the remaining parts of this series, we’ll analyze how different asset classes performed in the previous week and discuss the outlook for these asset classes.

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