Toro Company vice president Amy Dahl to depart at end of September
Stocks finished relatively unchanged on Tuesday, with the S&P 500 down just 13 bps. Volatility measures, however, were very much on the move, with 1-month implied correlation higher, the S&P 500 dispersion index higher, the VIX higher, the VVIX higher, and the VIX 1-Day higher.
All of this is tied to today’s FOMC meeting; it seems the market is a bit nervous heading into it.
The VIX1-Day is likely to be around 20 or higher by 1:59 PM ET today, as we count down the final seconds to the statement and the dot plot. There are just too many permutations of how this meeting could play out to review them all. The higher the VIX 1-Day climbs, the more likely we are to see some kind of market rally once Powell finishes his prepared remarks, as the hedges driving volatility higher are unwound.
If the VIX does fall sharply and the market rises, that’s simply market mechanics—it has little to do with what Powell does or doesn’t say. Unless the Fed shocks the market by not cutting, or signals no further cuts in the dot plot, I’d be surprised if we don’t see a volatility crush at some point.
Wednesday is also a VIX options expiration, and there’s no doubt that some of the gyrations we’re seeing in the implied volatility complex are tied to that.
Meanwhile, it should come as no surprise that the TGA reached $857 billion on September 15—mission accomplished.
More importantly, based on my estimates, reserve balances are now likely below $3 trillion, at around $2.95 trillion. We’ll know more on Thursday when the official numbers are released, though they will likely shift somewhat by then.
I could go on, but I am not. I am tired and have had enough.