The last six months have been most volatile in terms of the economy and financial markets despite stable rate gusts and point-to-point rallies in indices. The difficulty has been the levels of the VIX ( Volatility Index ) within the months, and December 2024 was no different.
During this period, VIX witnessed a high of 66 and a low of 11 with a close at 17. This level of variation between the levels has been strongest since January 2020. Wishing this period USA elections were held and Federal Reverse did cuts amounting to 1% along with limited escalation on the geopolitical front.
The important question is whether this level of variation within the months ahead will be higher or lower. The answer might be vague for now, but given the critical nature of the next couple of quarters for the global economy and political front, it is unlikely to remain subdued.
Starting with January, the President-elect has a final hearing relating to his crucial case just ten days before the inauguration. Fed Chair and other members are mentioning that the rate cut pace might be changed. Israel and Hezbollah ceasefire is about to expire with Iran rumoured to speed up its nuclear programme.
In addition to this emerging markets currencies are weakening to record levels with bond yields being near to pre rate-cut cycle.
All this in combination with a perspective trade war that might be more fierce than the first time around is adding to the probability of high VIX variation levels for the next six months.
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