The news did not make massive headlines. The VIX, the US volatility index which is also known as the “Fear Index”, just collapsed to an all-time low below 10. We recall that the 20-year average is above 20 for the index. A few weeks ago, Janet Yellen, Fed Chairman, warned markets about asset valuation which she considers as too high. Fed definitely believes that stocks markets are in a bubble. This is ironic as the Fed largely participated to underpin asset prices with free money.
While the volatility is at an all-time low, stocks prices are at an all-time high. There is then the potential relation between low volatility and high stock prices which could drive investors towards a sell-off. Markets are now in a pausing mode certainly fearing that consequence. However, stocks markets are not losing steam and may further head higher.
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All eyes are on Fed now which balance sheet reduction should be discussed in November. Currency-wise the dollar is now trading at 14-month low on recent disappointment of Trump expected fiscal policies and Fed failing to fully deliver what was expected.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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