Graph of the Week - Volatility indices: tariffs did not faze US markets (much or for long)

In the days after President Trump’s ‘Liberation Day tariff announcements on 2 April, the Chicago Board Options Exchange’s volatility index which tracks the expected turbulence of the blue-chip S&P 500 soared to its highest intraday level. Since then, the Vix index has fallen back to below the long-term average as markets have come to terms with the uncertainty over US tariff policy.   

Likewise, the MOVE index, which tracks volatility on the US fixed income market, leapt higher in early April before reversing quickly. 

Market volatility has declined as it became apparent to investors that the tariffs are likely to be settled at levels well below those initially announced. In addition, US equities had a good earnings season, the US economy has remained resilient and concerns over a recession have receded.

Markets have been ignoring the noise and focusing on the hard data which have not provided any unpleasant surprises.

Important information

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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