'Fear gauge' spike is swiftly erased after Trump's Greenland pivot

Dow Jones01-22

MW 'Fear gauge' spike is swiftly erased after Trump's Greenland pivot

By Jamie Chisholm

The stock-market volatility sparked by the latest Trump tariff row has swiftly subsided.

It's like it never happened.

The spike in the Cboe Volatility Index caused by U.S. President Donald Trump's threat to hit European allies with extra tariffs as part of his push to acquire Greenland has been swiftly wiped out.

The VIX VIX, an options-derived measure of expected moves in the S&P 500, tends to jump when stock markets fall sharply and has therefore become known as Wall Street's fear gauge.

It surged to nearly 21, above its long-term average of 19.5, when the S&P 500 lost 2.1% on Tuesday in response to Trump saying over the weekend that he would penalize NATO allies over Greenland.

"The VIX witnessed a little bit of a reality check as the growing ambitions of the U.S. to acquire Greenland and subsequent tariff threats on Europe pushed the fear gauge to its highest level since November," said Adam Turnquist, chief technical strategist for LPL Financial.

However, following Trump's U-turn on Wednesday, the VIX is down to around the 16 mark as S&P 500 futures move back toward the record highs registered before the latest selloff.

A clue to how quickly options traders thought the latest volatility spike could dissipate was seen in VIX futures, which remained below the VIX over recent sessions, a condition known in trader parlance as backwardation.

Usually, VIX futures are higher than the VIX to reflect the extra risk of holding a longer-duration contract, a condition known as contango. That is again the case on Thursday, with the VIX February future (VXG26) at 18.4, the March contract (VXH26) at 19.3 and the April contract (VXJ26) at 19.95.

-Jamie Chisholm

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 22, 2026 09:31 ET (14:31 GMT)

At the request of the copyright holder, you need to log in to view this content

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

'Fear gauge' spike is swiftly erased after Trump's Greenland pivot

At the request of the copyright holder, you need to log in to view this content

Comments