Calm Before The Seasonal Storm - VIX Has Some Catching Up To Do

The S&P 500 Index is due for many more swings like Wednesday’s in both directions, if the last 10 years history are any guide...

The volatility regime shifted dramatically since Trump was elected... are we due to go back to the old regime?


As Bloomberg notes, Wednesday was the fourth day this year in which the S&P 500 rose or fell more than 1 percent.

Similar moves occurred at least 38 times each year since 2009, when the bull market started. Among them were at least four fluctuations a year of more than 2 percent, a threshold not yet crossed in 2017.

Seasonals do not help..

But while the narrative for now is Trump's impeachment odds, we suspect there is far deeper issues, as we noted previously. The lagged response of the world's equity markets to Chinese liquidity is hard for even the most ignorant asset-gatherer to ignore - or argue causally.

And so that is it - the one chart that ties suppressed global equity volatility to the credit cycle in China - this will not end well.

China’s contribution to the broader global recovery may be waning. Further legs to the global reflation theme may now rely even more so on the Trump administration’s ability to deliver on key campaign promises, and gioven this week's debacles, those seem less likely than ever.

And the bottom line is simple - and even if China folds on its monetary tightening path, the next phase of volatility is baked into the cake.