Latest reports reveal that the US market’s apparent ‘fear gauge’ might be hinting towards the fact that the investors are not buying the rally. Investors, at the moment, are looking at the Cboe Volatility Index, which is thought to be the market’s fear gauge, as it carefully measures the equities against the expected volatility for a month.
Cboe Volatility Index – ( VIX 12.83 +0.67 +5.51% )
Photo by CNBC
There are many reasons why the investors and analysts are eyeing the Cboe index. First, the stock market kicked off the week in a rally mode, as the Dow dropped by three digits but went positive for the year. The S&P 500 did not have major changes to boast but still, it surged for 1%. Moreover, the VIX did not drop as much as the investors were expecting it too. It was positive for a brief moment but it fell by more than 1% before the markets closed. This was another hint regarding the fact that the participants might not be buying from the market or in the market, even after it has sort of rebounded from the recent low levels that it hit.
One of the biggest detrimental factors that are affecting the market, and the VIX and why it fell was the global trade. The global trade is a topic of common concern and it is heading in a direction that nobody is sure of. Things do not look pretty. China and the US are battling it out in trade wars and this has had a serious impact on the stock market in general and particular stocks as well. Moreover, if these issues are not resolved, the market will definitely pull back greatly. There is a lot of uncertainty in the market and this is something that might not be fully seen in the VIX but it is still affecting it greatly.
On Tuesday, the US stock index futures hinted towards a positive sentiment, as the shares went above 25,000 for the first time since the month of March. Dow futures, around 4:38 am ET, showed 49 points rise and implied a higher open of 46 points as well. Moreover, the Nasdaq and S&P 500 futures also showcased a high and upbeat start for the markets.
The biggest reason for the Monday’s rally was the prospective trade war between the two biggest economies, the United States and China. A tariff threat is severely undermining the markets and will continue to do so as well.
The trade war is the biggest impending force on the US stock market, as they sent the stocks rallying on Monday as well. However, amidst these trade concerns, latest data reveals that the oil prices have increased and have received a boost but they will show some signs of struggle to increase further. On a 12-month basis, oil will range between $55 to $75 a barrel, according to Manpreet Gill, FICC investment strategy’s head at SCB. Gill further said that while there is a lot of news that supports oil prices right now and will have a positive impact on the oil prices in the short run, they would still struggle to move ahead in the longer run. There are still major concerns regarding Venezuela and the US sanctions on Iran that have supported the oil prices during recent times but still, there is a lot of uncertainty about where the oil prices will head in the coming run.
Many factors affect the markets right now, amongst these are the US and China trade tensions, the US sanctions on Iran that are affecting the oil prices and the rising interest rates, that have had investors weary and something that has also had an effect on the US stocks but in latest revelation by Goldman Sachs, the rising interest rates should not be a point of concern or one shouldn’t worry about them until and unless the 10 year yield hits a 4% mark.
Photo by CNBC