What the FTF?! Keep calm and consider the risks

Don't bite off more than you can chew. Stay up-to-date with the latest market insight from Henry and the team with the What the FTF?! nibble.

With Wall Street's fear gauge approaching levels last seen during the 2020 Covid pandemic, we thought it timely to provide some snap analysis.

The Cboe Volatility Index, or VIX, tracks expectations for stock market volatility over the next 30 days, based on what investors will pay for options tied to the S&P 500 index. The more they'll pay, the more concerned they are with protecting their portfolios. It's a general indicator of anxiety in the market and is colloquially referred to as the “Fear Index”.

Post 'Liberation Day' and the introduction of far-reaching global tariffs on US imports last week, the VIX currently sits at 52.05 – 14.88% higher than this afternoon’s open, well above the threshold of 30, considered to be an indicator of material market stress and high enough to trigger the Bank of England’s stress test on Britain’s biggest banks and building societies.

So, what is causing the market stress?

Many analysts are suggesting stymied growth over the next year is a bigger worry than the potential inflationary effects. That would suggest more cuts to interest rates and sooner; possibly before the next scheduled meeting in the case of the Bank of England and the Fed. Of course, there is a lot of uncertainty to be considered – we are yet to see much reaction from other countries: so far, only China has announced reciprocal tariffs and there has been no sign of tariffs being negotiated down or postponed. And we still have no ceasefire deal in Ukraine, and an uneasy one in the Middle East.

Global stock markets are flashing red with almost all major indices over 10% down since the tariffs were announced. The so-called “Magnificent Seven” stocks have plunged over 5.8% today alone, based on current figures from early trading hours, and even gold has seen its long-running safe-haven bull run halted for now as investors need to liquidate cash to cover losses and margin calls.

How can you avoid the stress?

Stay calm, consider your risk appetite, and place your cash accordingly. For clients of TreasurySpring, our Credit Report feature provides up-to-date credit information tailored to your portfolio, as well as a snapshot of key market data, including the VIX, which should help you make informed decisions in this uncertain time.

Clients can check it out here.

And if you’re not a client, feel free to reach out to us for more information.

TreasurySpring’s blogs and commentaries are provided for general information purposes only, and do not constitute legal, investment or other advice.