In CNBC’s article “Wall Street volatility is breaking records, and there are likely to be aftershocks, says UBS,” Samantha Subin quotes Maxwell Grinacoff saying, “We anticipated a cooling CPI to take some wind out of the VIX sails, but there are still aftershocks when VIX spikes to such a degree, especially if a recession is still potentially on the table,” UBS is warning of possible ripple effects from recent market turbulence that has unsettled Wall Street, according to a note from Maxwell. While a cooling Consumer Price Index (CPI) was expected to relieve some pressure on the Cboe Volatility Index (VIX), volatility remains high. The VIX has recently hit its highest level since the early COVID-19 pandemic, showing ongoing market nervousness and uncertainty. The recent spike and quick drop in the VIX suggest the market might be overreacting.
This volatility has significantly impacted the S&P 500, which had its worst trading day since 2022. The rise in the VIX reflects broader concerns about a potential economic downturn amid lingering recession fears. The sharp swings in the VIX suggest that the market’s response could be exaggerated, indicating a period of unstable adjustment for investors.
UBS’s analysis, using two models, estimates the fair value of the VIX to be between 20 and 22. However, the VIX recently dropped to around 15, suggesting the market may have moved beyond these estimates. Grinacoff’s analysis indicates that while the VIX might eventually match these model predictions, current market movements could be an overreaction, pointing to a potentially unstable period as investors deal with increased volatility and economic uncertainty.
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