NEW YORK (Reuters) – Expectations for market gyrations are rising as investors defy the U.S. Senate overhaul in Georgia on Tuesday that will decide which party will control the Transport, among relapses in coronavirus cases.
The Cboe Volatility Index, known as Wall Street’s “fear measure”, on Monday marked its highest closing rate since Nov. 5, at 26.97, posting its biggest one-day gain since late October.
The VIX revenue curve, which reflects long-term expectations for market volatility, has also reversed for the first time since early November. A reversal of the curve shows that investors see the short-term outlook as more uncertain than the long-term.
If one of the people, Senators Kelly Loeffler and David Perdue in Georgia, wins, Republicans will retain control of the Senate. But the winners of the opposition Raphael Warnock and Jon Ossoff would bring control of the Senate – and Congress – to the Democratic party through a tiebreaker vote from Vice President Kamala Harris.
While a “blue sweep” of Congress could help further fiscal stimulus to support the coronavirus-impacted economy, it could also pave the way for President Joe Biden to push through a record -A more aggressive policy business, including more corporate governance and higher taxes. . That outlook has alarmed some investors on Wall Street.
“The‘ blue sweep ’creates some policy implications that need to be addressed,” said Arnim Holzer, EAB Investment Group’s macro and correlation protection strategy. “Those two barbells hold a high rise. ”
Overall, volatile volatility – the measure of expected market movements rooted in options prices – has jumped far ahead of volatility, or real stock movements.
According to data from Susquehanna Financial Group, the gap between volatility and real volatility is close to the two-year high for the S&P 500 SPDR Trust, which monitors the U.S. stock index.
The gap is similarly broad for several U.S. trade funds in technology and healthcare, segments seen as key targets for tougher regulation under Democratic Congress.
Christopher Murphy, co-head of Susquehanna’s derivatives strategy, expects understandable volatility to decline shortly after Georgia’s runoff, as it did after the presidential election.
But this time, concerns about the recovery of COVID-19 may keep volatility rising even after the runoff, said Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets.
“The ‘blue sweep’ would certainly have an impact on the market, but I do not see conventional volatility particularly related to administrative change,” she wrote in an email to Reuters.
Reciting with April Joyner; Edited by Lincoln Feast.