Market Update: Volatility-Linked Investment Products and the Equity Market Correction

The CBOE Volatility Index® (VIX®), sometimes known as the “fear gauge,” often is used to measure investor risk expectations in the equity market.

Last week, investors seem to have come to believe this is no longer a world in which interest rates stay low forever and equity market volatility remains low. Unwinding such a persistent narrative has been, and may continue to be, painful.

It is hard to know for sure what caused the increased market volatility. Investors love clear explanations for why things happen. Looking backward it is always easy to come up with any number of reasons for the recent correction. In our Market Update we list a few of these reasons, discuss important considerations, and look ahead to what may be in store for markets with regard to volatility.

As we wrote in our February 6, Market Update, Keeping Things in Perspective, a call for higher volatility does not necessarily imply heightened expectations for lower asset prices. We believe markets will remain significantly more volatile than they were in 2017. But ultimately our view is that the bull market is not over.

For more information, please contact your PNC Advisor or call 888-762-6226 to request an appointment with a PNC Wealth Management Professional.

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