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The VIX Slides as Investors Cheer CPI and Bank Earnings
That sound you heard coming from Wall Street on Wednesday? A huge sigh of relief following strong earnings from Dow components Goldman Sachs and JPMorgan Chase as well as other big banks, coupled with a smaller increase in core consumer prices for December than economists were expecting.
Stocks soared, with ten out of 11 sectors in the green. Bond yields dipped. And the market’s so-called fear gauge tumbled as well. The Cboe Volatility Index, or VIX for short, slid 12% to about 16.50. The VIX is now down 5% this year and is more than 40% below a recent peak near 28 in mid-December.
Further evidence of waning inflation pressures could lead to a continued decline in market volatility. Healthy earnings will help as well. But investors will still need to keep a close eye on the VIX in the weeks and months ahead. The inauguration of Donald Trump is next week---and the threat of tariffs looms large. Anything that raises the specter of more inflation could push stocks down again---and the VIX back toward more elevated levels.
