Volatility and Economic Uncertainty

Short-dated volatility on the S&P 500 has reached year-to-date lows, reflecting contrasting dynamics in the market. Despite this low volatility, U.S. economic policy uncertainty has spiked, indicating a tension between market optimism and underlying risks. The VIX index, which measures market volatility, has remained relatively stable, hovering around 15, despite significant macroeconomic challenges like tariffs and inflation. Market participants, including hedge funds and households, are actively navigating these conditions by focusing on sector-specific volatility rather than overall index movements.