Low Volatility Thanks to Central Banks
Our chart shows the relatively low levels of realised and implied volatility, as measured by the rolling 90-day S&P 500 index volatility and the VIX respectively. Actions and rhetoric from central banks, the Fed in particular, can explain a large part of this. It is clear that investors are still strong believers in the Fed put – the general belief that the Fed is willing and able to adjust monetary policy in a way that is supportive for stock markets. However, in an environment where most valuations remain high, volatility cannot be ruled out.
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