About a month ago, we wrote a post about how volatility metrics throughout global financial markets were all near all-time lows:
Even NPR’s Morning Edition is highlighting the VIX. As CC pointed out to us this morning, the national radio station did a segment on the low VIX on their morning program, likely to the confusion of its general interest listeners.
Volatility has been low for a long time, but when you reach an extreme where all asset prices have volatility near all-time lows, it could be a more significant turning point.
Since then, implied volatility has inched slightly higher in many assets, with the Euro Stoxx 50 index the one standout where it is now near the 52 week average:
However, when I look at the charts of the major macro assets, many of them look to be near potential inflection points, though perhaps it’s simply another false alarm as so many have been in the past 6 months.
First, the strongest by far is the S&P 500 index:
Both the 50 day and 200 day ma are steadily rising, and the 200 day ma has not been touched in more than a year.
The Euro Stoxx 50 index in Europe has seen a bout of selling the past few weeks, and is actually less than 2% away from its rising 200 day moving average, which it also has not touched in more than a year:
The 10 Year yield also shows a bit more fear among the global investor base, as it has fallen away from the declining 50 and 200 day ma’s, and is nearing a 1 year low:
Having said that, the 10 year yield has ten in a downtrend since early January, and that has not affected overall risk appetite for stocks.
As for currencies, the EUR/USD cross is at a critical juncture as well. EUR/USD is near a 6 month low, slowly moving lower on low close-to-close volatility:
The 1.35 level marked in green is a pivotal spot for the currency cross.
Finally, the USD/JPY cross has broken convincingly below its 200 day moving average this month for the first time in the past year:
Like the U.S. 10 year yield, the USD/JPY cross has been trending lower since January, but perhaps volatility markets will take notice if it breaks the psychologically important 100 level.
The geopolitical headlines have picked up globally, and investors might start to reduce their positions if the jitters continue. Regardless, the charts show the important inflection points for many of the largest asset markets in the world.