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What's Going On With The VIX?

by
June 14, 2016 12:15 pm
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After opening at its lowest level since August just a week ago, the VIX has now spiked to its highest point since February. There are a number of potentially market-moving events in the news this week. Here’s a look at what is driving market fear.

Brexit Vote

More than anything else, the market is concerned about the UK’s upcoming referendum vote to leave the European Union. The vote takes place next week, and if Britain voted for a Brexit, it could severely disrupt global trade and financial markets.

According to Bloomberg’s Brexit Likelihood Score, the chance that voters will choose to leave the EU is currently only 33 percent, but the number has been on the rise in recent weeks.

Fed Meeting

The FOMC June meeting announcement is scheduled for 2 p.m. ET on Wednesday. After the Fed strongly hinted at a June rate hike, the U.S. jobs report for the month of May came in surprisingly weak. Many economists now feel that the Fed will be forced to delay the next rate hike, but the market doesn’t really know what to expect from Janet Yellen and company.

Related Link: Why Financial Experts Often Have Worse Market Judgement Than Retail Investors

U.S. Election

It seems a near certainty at this point that the next U.S. president will be either Donald Trump or Hillary Clinton. Trump made news this past week for racist comments about a Hispanic judge, and Clinton met with outspoken anti-Wall Street senator Elizabeth Warren. Many are speculating that Clinton could choose Warren as a running mate.

With one Presidential candidate who is an unpredictable loose-cannon and another who has a crackdown on Wall Street at the core of her platform, it’s understandable that investors could be getting concerned.

In the past five trading days, the SPDR S&P 500 ETF Trust (NYSE: SPY) is down 2.0 percent, but the iPath S&P 500 VIX Short Term Futures TM ETN (NYSE: VXX) is up 30.8 percent.

Disclosure: the author holds no position in the stocks mentioned.


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