Earnings Buoy Risk Sentiment as Volatility Falls

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Macro Volatility Digest: April 29, 2024

Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

Implied volatilities fell meaningfully across asset classes last week, with the exception of FX (led by USDJPY on BOJ intervention fears). US rates vol is back down to the 13th percentile low (over the past year) ahead of this week’s FOMC meeting as investors come to terms with “higher for longer”. Stronger-than-expected earnings buoyed the equity market, with the VIX® down 3.7 pts wk/wk. Oil volatility fell to near a 1-year low despite ongoing geopolitical tensions. With mega-cap Tech earnings taking center stage last week, it’s no surprise US index vols led the decline – with SPX®, QQQ, and RTY ranking as 3 of the top 4 vol movers globally (see chart below). Single stock volatility fell even more meaningfully, driving the DSPXSM Index down over 3.3 pts to 29.4%. As we get into the heart of earnings season, we expect DSPX index to stay under pressure in the near-term.

Chart: US Index Vols Among Biggest Decliners Wk/Wk

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