Low levels of implied future volatility are also now being seen in European markets after France’s widely welcomed presidential election result.
The VIX index, which measures implied volatility in the US stockmarket, closed at 9.77 points last night – the lowest level seen since December 1993.
The VSTOXX index, an equivalent European measure, closed at 14.39 points yesterday – close to its lowest level in 2017 so far.
Many experts claim that low implied volatility usually precedes one or two weeks of positive returns on equity markets.
However, a recent Portfolio Adviser analysis found technical factors such as volatility trading can influence such indices and make them an unreliable indicator of future market conditions.
Deutsche Bank analyst Jim Reid said the S&P 500 index has now closed “with a daily move of less than 0.20% (up or down) in 8 of the last 9 trading days”, in a sign of the sanguine times.
