Relative Volatility Springs Higher by Jennifer Thomson, Gavekal Capital Blog
If we take the differential between volatility in the Stoxx 600 (Europe) versus that of the S&P 500 (United States) as a proxy for relative levels of market fear, it might be useful to note that it broke to an all-time high on Monday–surpassing levels reached in 2011 and last year.
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Either variable on its own doesn’t exactly scream ‘signal’, but the combination of much more subdued volatility in the U.S. versus the gradual uptrend in European markets produces a stark contrast.
With all of the ECB’s monetary easing, fairly benign economic data releases, and relative quiet on the peripheral (i.e. Greece) front, we find this strong divergence to be somewhat surprising.