On April 25, JPMorgan strategist Marko Kolanovic said that for investors who view the market’s recent downturn as a good time to buy stocks, trouble may still lie ahead.
CBOE’s chief equity strategist said the VIX gauge, which measures market sentiment, was at “exceptionally low” levels given macro risks such as rising interest rates, tightening financial conditions and geopolitical tensions.
This is the result of options sellers dominating the market, as selling in options forces an intraday correction and keeps market prices virtually unchanged for many days.
Kolanovic warned that such market dynamics, which artificially dampen perceptions of risk to macro fundamentals, are an anomaly and that current low volatility is unlikely to last for long.