Stocktake: Are calmer times ahead for investors?

Stock market volatility continues to decline. The Vix, Wall Street’s so-called fear index, fell below 20 last week – way below last March’s 2020’s record close (82) and the lowest level since before the pandemic began.

Vix readings have historically averaged around 20, and various strategists see sub-20 readings as potentially signalling a transition from a high-volatility regime to a low-volatility one.

Stocks tend to outperform during low-volatility periods, so traders will be closely watching to see if sub-20 readings are sustained.

The Vix briefly fell below 20 at various stages over the last eight months before promptly spiking higher. Will this time be different? Are calmer times ahead?

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Maybe not, say JPMorgan strategists, who note that volatility "typically spikes 15-16 months into a bull run", indicating risky assets may pull back in June or July.

They expect the US to reach herd immunity and for a “major resumption” in economic activity around this period, but investors may well take a sell-the-news attitude; as the last year has shown Wall Street often doesn’t reflect life on Main Street.