VIX 'Tempest-In-A-Teapot'… Or Something Bigger?
By Tyler Durden
Authored by Nicholas Colas via ConvergEx,
US equity market volatility is back. The VIX closed today at 14.2, which is the 7th highest ending price this year. The “Fear Gauge” is up 13% in the last month and the S&P 500 is down 74 basis points over the same period.
Tempest in a teapot, or something bigger? I believe the latter, mostly because of the way the current VIX rally has filtered through various industry groups and asset classes.
Point #1: the “VIX of” US large cap tech stocks is up 45% over the last month, versus the 13% rally in the VIX. That’s the largest jump in sector VIX across the entire S&P 500 and speaks to market concerns over sector valuations, earnings power and how “crowded” that trade has become.
Point #2: the “VIX of” small and mid-cap stocks didn’t rise as much as that of large caps. Large caps have been leadership this year, so that tells us options traders are concerned about those stocks having run too far, too fast.
Point #3: Valuation matters. The VIX of large cap Health Care stocks (one of the few bargains in the S&P 500) barely budged last month, up only 14%.
My conclusion: the rally