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“In business, people are judged on results. In Washington, people are measured by their ability to get reelected.” – Ross Perot
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Even with Senate testimony from Fed Chair Powell looming over the market, the S&P 500 and Nasdaq are poised to trade at record highs again this morning. Asian stocks were higher overnight led higher by Japan where the Nikkei jumped 2%. It’s a weaker tone in Europe, though, where the STOXX is down fractionally on little news. Here in the US, small business sentiment from the NFIB came in higher than expected after unexpectedly rising a point relative to last month. In earnings news, the only report of note was Helen of Troy (HELE), but the stock is getting slammed in the pre-market with a decline of 25% as the company noted weak consumer spending.
As the S&P 500 and Nasdaq hit new record highs again yesterday, volatility has been hanging out right near their lowest levels since the Covid pandemic. In a year where Presidential candidates on every side of the aisle have warned that the “future of the country” is at stake, do you think the market would be more edgy?
The fact that volatility isn’t even a teenager is unique. As shown in the chart below, since 1992, the VIX has been higher than its current level of 12.5 as of July 9th in every single election year. In 2020, the VIX was more than double its current level, but that was largely a factor of the Covid outbreak. Before 2020, though, the VIX was also uncharacteristically low in the summer heading into 2016.
The VIX is not only low for this time of year in an election year, but it’s also low relative to all years as of July 9th. As shown in the chart below, the median VIX reading for July 9th since 1990 has been just under 16 and is the lowest for this time of year since 2017 (11.2). It’s also the 6th lowest reading for this time of year since 1990. While low now, though, there’s a good chance that the VIX will move higher leading up to the election. Since 1990, the median maximum increase in the VIX during the four months following July 9th has been 8.9 points whereas in election years, the median increase over the following four months has been 13.1 points.
