Earlier today, I brought you the following chart from Deutsche Bank which highlights the discrepancy between rates vol and equity vol:
I noted that this just builds on the thesis that stocks have become completely disconnected from rates and FX in terms of vol. That’s a dangerous thing because it only corrects in one of two ways: 1) rates and FX vol subside, or 2) equity vol rises.
When if equity vol rises, your stocks will likely get hit.
Well in case you didn’t believe Deutsche Bank’s chart, here’s a similar visual from Goldman who notes that “while S&P 500 3-month ATM implied volatility is close to its 2nd percentile over the last 10 years, swaptions on US 10-year yields have sharply repriced implied volatility higher.”