Volatility Spikes After 7% Dow Drop – ICoQuet
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Volatility Spikes After 7% Dow Drop

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Equity index futures are rebounding this morning after Wall Street’s worst day in three months. News of rising coronavirus cases has again stoked fear in the markets and recent comments by the Fed have also shaken trader confidence.

As businesses reopen in the US, a rising number of coronavirus cases has many investors concerned over how the situation might escalate. Additionally, the Federal Reserve warned of a possible long road to economic recovery on Wednesday, decelerating the bullish conviction seen early this month.

VIX on the Rise Again

Dow futures tumbled more than 6.5%, S&P 500 futures fell 5.5% and Nasdaq futures dropped 4.6%, significantly raising market volatility. Having been on a decline since early April, The CBOE Volatility Index (VIX) spiked above 40, reflecting increased anxiety among speculators.

This morning markets look to be bouncing from yesterday’s abrupt selloff:

The chart above shows activity in the VIX since the start of the year. The most widely used indicator of market volatility, the VIX helps reveal both investor sentiment and market risk.

Risk management should remain paramount when speculating unpredictable markets and traders should take appropriate measures to protect investment capital.

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