Andrew Giovinazzi's blog
Well… not really. 60 day IV is at a 1 year low for TLT as shown on the Livevol chart below. And yet I can’t help but think the recent rally in bond prices is some reflection of market worry. Let’s call it Shadow Volatility. With the Fed raising and getting ready to dump their rather large block of securities you would think TLT and longer duration bonds would be softer but this is not the case. Something else is afoot.
We pull out of the Paris Climate Accord and the SPX has its best day all week. It might have had to do more with the ADP number but really until there is a shock stocks are going higher on a wave of earnings and economic growth. Another thing grew today and that is the skew in the SPX.
Well for GS, $260 we barely knew ya. After melting the upside for the 1st quarter of 2017 GS is actually down for the year and very near prices right after the election. The GS/Venezuela duet is not playing great in the news and the stock is getting clobbered. You would think the coming dump of US Gov securities from the Fed would push up rates but that has not happened yet.
Time moves forward and the pull of the Fed and rising earnings are keeping stocks at forward multiples we have not seen in quite a while. Daily we get the call for the next correction. Doubtless it will happen at some point but it seems tough right now. Markets were very focused on the circus in the Washington DC and now that is just what it is. A circus with a ring that goes around and show really does not change a whole lot. As a consequence, VIX is still in the 10 handle and realized vol is 11% for SPX with short term options under 6% ATM IV in the SPX.