The VIX concept formulates a theoretical expectation of stock market volatility in the near future. The current VIX index value quotes the expected annualized change in the S&P 500 index over the next 30 days, as computed from the options-based theory and current options-market data. There has been significant financial market volatility over the last five years. A non-exhaustive list of risk events over this period includes:
- Greece debt crisis – 2012
- Chinese stock market shocks – August 2015 & January 2016
- Brexit – June 2016
- Election of Donald Trump as the US President – November 2016
Interesting to see that the Trump effect was limited when you compare it to Brexit, Chinese Stock market etc. Markets seem to be tolerant of the change in the President mainly due to:
- Trump’s pro-business stance, which brings expectations that he’ll cut corporate tax and deregulate aspects of the economy.
- Trump promised increased infrastructure spending which will inject more money into the circular flow which should increase aggregate demand.