Volatility and uncertainty
Most of our investors may find this hard to believe but for some time there has been a concern that markets are not volatile enough. Volatility is extremely low across a range of indicators, of which the CBOE Volatility Index (VIX) is the most closely watched. The VIX, also known as Wall Street’s fear gauge, is hovering close to its lowest levels since its creation in 1993, barely in double digits (Chart 1). It measures the implied volatility of the S&P500, since it effectively represents what investors are willing to pay for protection against declines (the more fearful, the more they are prepared to cough up). Actual or realised volatility (daily moves of stocks, bonds and currencies) has also declined in recent years.