In the days after President Trump’s ‘Liberation Day tariff announcements on 2 April, the Chicago Board Options Exchange’s volatility index which tracks the expected turbulence of the blue-chip S&P 500 soared to its highest intraday level. Since then, the Vix index has fallen back to below the long-term average as markets have come to terms with the uncertainty over US tariff policy.
Likewise, the MOVE index, which tracks volatility on the US fixed income market, leapt higher in early April before reversing quickly.
Market volatility has declined as it became apparent to investors that the tariffs are likely to be settled at levels well below those initially announced. In addition, US equities had a good earnings season, the US economy has remained resilient and concerns over a recession have receded.
Markets have been ignoring the noise and focusing on the hard data which have not provided any unpleasant surprises.
