VTI - The Stock Market Unwind May Have Only Just Begun

2024-07-19 10:43:31 ET

Summary

• Equities pulled back this week due to rising volatility and implied correlations, after the 1-month implied correlation index reaching historic lows.
• Realized and implied volatility levels have been increasing, leading to a potential further rise in implied correlations as earnings season and Presidential elections approach.
• Stock market faces challenges with rising implied correlations, higher valuations, and increased implied volatility leading to potential S&P 500 decline.

Equities have pulled back this week as rising realized and implied volatility have increased implied correlations. On July 12 , the 1-month implied correlation index reached historic lows. Since then, the implied correlations have risen sharply but are still low by historical standards and are likely to rise more as we move through earnings season, and implied volatility levels rise as we move into the Presidential election....

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