Usually it is pretty easy for me to come up with something new to say regarding what went on the volatility markets last week. However, it has been a lot of the same for a pretty long time now. We have now experienced three all-time highs for the S&P 500 in 2015, which is three more than some forecasters thought we’d see, and VIX is working down to levels we were accustomed to over the past couple of years.
Friday’s VIX close of 14.30 is just a tad higher than the average VIX close in 2014. On the shorter end of things VXST was down very little on the week, but last Friday’s close was in front of a three day weekend which always puts a little pressure on VXST. The average for VXST in 2014 was 13.69, so this 11.74 reading shows a lot of complacency over the near term for the equity markets. I quickly consulted the economic calendar and next week is pretty light on the new news which easily explains the low VXST. For comparison sake I decided to add the 2014 averages to the volatility term structure chart below.
In the ETP space SVXY and XIV benefitted from the two record setting S&P 500 days last week and managed to crawl out of the hole to positive for 2015. The long funds all took a dive and dug their respective 2015 performance holes a little deeper.
In the table above VVIX dropped 7.5% on the week to finish in the mid-80’s. VVIX is a volatility index based on VIX option pricing. The high – low range by year plus the average for each year going back to 2007 is highlighted below. Like the volatility indexes in the first chart, there appears to continue to be elevated risk perceptions in the VIX market despite the S&P 500 hitting new records.