August is halfway through, and this month looks set to be one of the quietest months in the history of the S & P 500. Beneath the surface, however, market anxiety about the outlook for the index shows no sign of abating.
A measure of implied volatility in VIX options has risen in five of the past seven weeks, although the VIX itself has been falling. That brings the index, known as the VVIX index, to 7.5x VIX on Friday, a level last reached two months before the COVID-19 outbreak.
Historically, when the ratio is higher than the current level, the stock market will not perform very well. Chris Murphy, co-head of derivatives strategy at Heiner International, said the ratio had risen seven times since 2006, with VIX often rising 10 days later, by an average of 16 per cent.