Regardless of the outcome, we all expected VXST to get routed last week and that’s exactly what happened. I’ve worn this out, but the election was like an earnings announcement with respect to the broad-based equity markets. We see volatility crushes occur on short dated options when a company reports and we saw that for SPX options this past week.
The highlight of the table below is TYVIX. Uncertainty came out of stocks, but made its way into the fixed income markets. We’ve got one more Fed meeting in 2016, December 14th to be exact, and as of Friday the markets were pricing in an 81.1% chance of a hike. Something else on the table below that catches my eye is VVIX which finished the week just below 100.00. That’s still high relative to recent history and an indication that we may not have completely escaped market volatility in 2016.
SVXY has a banner week risking over 17% and is back on track to put up a 50% plus year in 2016. I’m ready to move to 2017 on this chart and give VXX and UVXY fresh starts.
In addition to bond volatility, precious metal (GVZ and SLV) and oil (USO) volatility rose last week. Emerging market volatility was flat, but remains at high levels and VXEWZ representing Brazilian market volatility was higher.