The U.S. stock market has been flashing an important signal that suggests concerns about the banking sector have dissipated after the sudden collapse of Silicon Valley Bank earlier in March. The Cboe Volatility Index
a gauge of expected volatility in the S&P 500 index, dropped below the 20 level last week for the first time since March 8, suggesting a return to a lower risk environment that prevailed before Silicon Valley Bank first announced it had to sell securities to strengthen its deteriorating financial position.
The index, often referred to as Wall Street’s “fear gauge,” was down 1.7% at 18.70 on Friday after rising above 30 on March 13, the first trading day after regulators announced emergency measures to stem fallout from Silicon Valley Bank’s failure. “It’s not a normal volatility environment,” said Johan Grahn, head ETF market strategist at AllianzIM. “We’ve spent 95% of trading days in the past 12 months above 20, while we were above 20 only 15% of the time in the 8-year period before the pandemic-driven volatility started in February of 2020.” He also noted the VIX topped 30 in one of five days over the past 12 months on average, but only one in 100 days over the same 8-year period before the pandemic. “Now we’re living in those periods as if it’s normal, but it’s not normal based on that history,” Grahn said. Other market analysts also said investors should beware of what comes next. Interest rate cuts in 2023 could signal a tan …