- Like fashion, volatility is cyclical. Since its February 2020 spike above 40 (at the onset of the Covid pandemic) the average daily closing value of the Cboe® Volatility Index (the VIX®) is 25.16 – and it has not dropped below 15 during the pandemic era.
- Today’s volatility is much more in line with levels seen in response to events such as the 9/11/2001 terror attacks and the Great Financial Crisis of 2008.
- Pandemic era volatility has also been exacerbated by Federal Reserve (Fed) policy and the mix of participants in the market for options and other volatility-linked derivatives.
- With the Fed now fighting record inflation with higher policy rates and reducing its balance sheet, it appears the volatility-dampening era of quantitative easing may have come to an end.