‘We Miss Volatility’ – ‘This Is A Strange World’

Equity vol is not an island.

That’s from Goldman, who reminds you that if all you’re paying attention to is the VIX, then you should look around, because volatility is suppressed across the board.

Hopefully, you already know that, but on the off chance you don’t, have a look at this:

This is a good time to roll this chart back out:

Oh, nothing. Just a HY trading range that’s ~400bps narrower than last year.

“Despite the attention on this year’s low VIX, equity vol operates in the context of its underlying market, other asset classes, and economic conditions,” Goldman wrote on Tuesday.

Yes, “economic conditions.” And also “conditions” engineered by central banks. “As long as interest rates stay low and there is so much liquidity in system, it’s hard to see volatility in the market,” Apollo Global Management CEO Leon Black said today at a conference in Riyadh, before adding that “we miss volatility. We are living in a strange world with lot of geopolitical volatility but it’s not in financial markets.”

“Strange world”, indeed. And according to Michael Purves, Weeden & Co.’s chief global strategist, it’s about to get “stranger” still. Here’s what he said in a radio interview Wednesday:

A print of 7 or 8 on the CBOE Volatility Index between now and the end of the year is a very real scenario.

We would just modify that a bit as follows:

A print of 7 or 8 on the CBOE Volatility Index between now and the end of the year is a very surreal scenario.