Volatility Markets Flash Warning Sign That Preceded Prior Routs
- VIX curve inversion shows effect of Trump’s trade threats
- Equities sell-offs have followed backwardation in recent past
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Volatility markets are signaling elevated risks for equities, flashing a warning sign that portended some of the major market meltdowns in recent memory.
The front-month VIX futures curve traded above the second-month future shortly after 10 a.m. New York Time as the retreat in the S&P 500 Index intensified. The inversion was spurred by a second wave of selling following comments from U.S. Trade Representative Robert Lighthizer late Monday, when he affirmed that President Donald Trump’s vow that the U.S. would hike tariffs on China wasn’t empty. Those comments delivered a blow to traders who hoped the president’s weekend tweets were mere posturing.