Wall Street's fear gauge rises

Plus IMF/WB Spring Meetings policy updates

Author

Paul Della Guardia
April 18, 2024 • Estimated Reading Time: 10 minutes

  • Why VIX hasn’t actually risen that much (and why it should rise further).

  • IMF Reforms to Support Countries Undertaking Debt Restructurings

  • Global Sovereign Debt Roundtable — 2nd Cochairs Progress Report

  • A stocktake on reforms to MDBs

  • Germany’s dependence on China

  • US aid package for Ukraine & Israel

Chart Spotlight: Much ado about VIX

The headline article in yesterday’s FT focused on the “soaring” Vix index, a well-known measure of investor skittishness.

VIX rises when market participants expect more volatility in the S&P 500, as it reflects the cost of buying options used to profit from changes in stock prices.

It’s clear that markets are concerned that interest rates will be higher for longer in the US as the Fed grapples with sticky inflation and by escalating Iran-Israel tensions.

These are the reasons that pushed VIX this week to its highest level since October (see chart). That spike occurred amid investor worries over Hamas’s attack on Israel and before Fed chair Jerome Powell’s dovish end-of-year remarks.

While it is true that this could mark a turning point for markets, what stands out to me is how low VIX went in December and January. Upbeat sentiment around the Fed lowering rates by June or earlier would certainly have warranted somewhat of a decline.

But Israel’s retaliation against Gaza, Houthi attacks on maritime traffic in the Red Sea, and reversals on the battlefield for Ukraine’s military amid US Congressional delays on aid have punctuated the past several months. These should have dampened investor euphoria more than they did.

Moreover, taking the long view, VIX isn’t exactly “soaring” (see chart). Perhaps it should be higher than where it currently is, and may well rise.

But, frankly, with the pandemic and the wars in Ukraine and Gaza defining the decade so far, this modest rise in the VIX shouldn’t be at all surprising. This is what I believe is called, in the official parlance, a nothingburger.

As for the supposedly “soaring” VIX, for the FT I have only one question:

Sovereign Debt

  • IMF: Executive Board Endorses Reforms to Promote the IMF’s Capacity to Support Countries Undertaking Debt Restructurings

  • IMF: Global Sovereign Debt Roundtable — 2nd Cochairs Progress Report

  • Ghana: IMF Reaches Staff-Level Agreement on the Second Review of the Extended Credit Facility with Ghana

  • HKS: A Modified Common Framework for Restructuring Sovereign Debt

  • China: Levelling the playing field: OECD responses to China’s overseas finance

  • Kenya: Austerity the price of debt workout dodge

  • El Salvador: Government comments suggest IMF progress to follow elections

  • Climate: Debt Sustainability and the Race for the 2030 Agenda and Paris Agreement

Emerging Markets & Developing Economies

  • Springs: What to expect at the World Bank Spring Meetings 2024

  • IMF: Emerging Markets Are Exercising Greater Global Sway

  • China: Why China's debt-ridden local governments left trillions of special bond proceeds unused

  • India: Can the Indian Economy Overtake the Chinese?

  • MDBs: Are MDBs Actually Implementing Reforms?

  • MDBs: Implementing MDB Reforms: A Stocktake

  • Venezuela: Seeking the Best from a Skewed Poll: Hard Choices for Venezuela

  • South Korea: Reformist President Yoon left quacking after parliamentary election

  • Saudi Arabia: Riyadh to scale back plans for Neom city

  • Argentina: Argentina’s Economic Challenges | Econofact Chats

Deglobalization

  • IMF: Industrial Policy is Back But the Bar to Get it Right Is High

  • IMF: Industrial Policy Is Not a Magic Cure for Slow Growth

  • Bretton Woods: Economic multilateralism 80 years after Bretton Woods

  • Germany-China:

    • German companies’ dependence on China will last decades, warns Siemens

    • Scholz’s Visit to China Confirms Germany’s Political Weakness

  • US-Ukraine: US Speaker Johnson releases preliminary details of a new $43bn Ukraine aid package

  • US-Japan: Biden-Kishida Summit: 3 Ways to Strengthen the U.S.-Japan Military Alliance

  • US-EMs: Emerging Powers and the Future of American Statecraft

  • US: Do Immigrants Cost Native-Born Taxpayers Money?

  • Switzerland-Russia: Activists trigger referendum that could end Swiss sanctions on Russia

  • Russia-China: Putin and Xi’s Unholy Alliance

  • EU-Russia: The EU is preparing a new, fourteenth package of sanctions

  • Russia:

    • Is the Kremlin Overconfident About Russia’s Economic Stability?

    • Crypto firm moved $4.2m of assets to digital wallet linked to alleged Russian arms dealer

  • Serbia: Sanctions Haven’t Stopped Notorious Serbian Arms Merchant Slobodan Tešić

  • Belarus: Belarus the latest European country to suspend the Treaty on Conventional Armed Forces in Europe

  • Poland: Warsaw wants no part in the EU’s plan to receive asylum seekers

  • EU-Azerbaijan: Can Energy Ties Prevent an Azerbaijan–EU Rift?

  • Africa: Facing neither west nor east – but forwards

  • Niger: How the United States Lost Niger

  • Climate: Climate Change and Globalization

De-dollarization

  • China: Household consumption in China is not as low as many think

  • Ukraine: Some thoughts around burden sharing

  • BRICS: Chinese Yuan Officially Overtakes US Dollar (as the top traded currency in Russia)

Geopolitics

  • Iran-Israel: Iran's attempt at a "Goldilocks retaliation" strike on Israel was designed to fail, but tensions remain high

  • Iran-Israel: Gauging craziness

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