Wall Street's benchmark reading of investor concern, often referred to as the "fear index," is trading near the lowest levels of the year this week as a surprising summer rally has stocks hitting all-time highs.
The Cboe Volatility Index, or VIX, designed as a real-time estimate of the expected daily moves for the S&P 500 based on equity options trading, was trading around 14.56 on Friday.
That's the lowest since early January and more than half the level it traded at in late March, when stocks began their long post-Iran conflict climb to record a series of record highs in the spring before resuming their tech-paced rally in late July.
At current levels, the VIX is suggesting daily swings of just 67 points for the S&P 500, in either direction, over the next 30 days, a muted level of movement in a market beset with concerns over Federal Reserve rate hikes, government debt and deficit figures, AI spending and investments, and the U.S. war with Iran.
Those concerns, however, might be evident in a less-known corner of the market risk gauges, the Cboe Group's Skew Index, which tracks the likelihood of Black Swan events that can roil stocks with violent, sudden moves tied to big events.
The Skew index spiked in February 2025, just before stocks tumbled in the wake of President Donald Trump's tariffs, but largely missed the U.S. strikes on Iran that initiated the Gulf conflict earlier this year.
It was last marked at 134.37, a relatively muted level for the year but more than 6.6% higher than it was in late July, when the VIX began its midsummer retreat.
That's raised some eyebrows on Wall Street.
"When Skew rises while Vix stays low, it means the same market that shrugs at a normal-sized move is paying up, aggressively, for protection against an abnormal one," said Michael Gayed, portfolio manager of The Free Markets ETF. "The center looks cheap. The wings look expensive."
Wildcard risks are certainly out there, perhaps no more so than in the Gulf, where the U.S. has moved from military strikes on Iran to a program of systematic stresses for Iran that Treasury Secretary Scott Bessent claims will "apply measures like have never been seen in the history of economic isolation on a country."
Global oil prices have nudged higher as a result, rising nearly 5% this week to around $87.20 a barrel, with futures prices keeping Brent crude elevated past the $80 mark into the end of the year.
Bond markets, too, are largely ignoring the softer inflation prints this week, as well as the negative jobs gains published in the July employment report, as deficit levels rise, overall U.S. debt nears the $40 trillion mark, and broader Treasury supply continues to suppress demand.
A sale of 30-year bonds on Thursday was the government's most expensive sale since the summer of 2001, drawing an average yield of 5.126%. A sale of benchmark 10-year notes earlier this week resulted in the highest average yield since 2007.
None of those issues, of course, has stopped the summer rally in stocks, but the pace of gains has slowed this week, even as the S&P 500 notched a new record high of 7799 points on Thursday.
This week's advance for the benchmark has been a mere 0.5%, compared to last week's 3.6% surge. An index of the biggest tech stocks, meanwhile, is down 0.8% for the week, while the PHLX semiconductor index has nudged only 0.8% to the upside.
A falling VIX, with softening stock gains, rising geopolitical tensions, and a grumpy bond market typically don't mix well.
But whether these moves are symptomatic of a market that's nervously digesting new data, or merely influenced by the traditional August volume lull, remains to be seen.
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