SPX Skew Signals Longer-Term Caution Despite Rally

Summary

• Implied volatilities fell across asset classes last week following the US-China tariff reprieve, with equity and credit implied volatilities dropping the most.
• The VIX index fell almost 5 pts, while VIXIG (IG credit vol) declined over 7 pts – both are now trading below their long-term averages.
• The decline in index vol was notable as single stock volatility remained mostly unchanged. In other words, the decline in the VIX was almost entirely driven by a collapse in implied correlation levels, with COR1M index down over 13 pts to 16%.

Jonathan Kitchen

Originally published on May 19, 2025

Cross-Asset Volatility: Implied volatilities fell across asset classes again last week following the US-China tariff reprieve, with equity and credit implied volatilities dropping the most. The VIX Index fell almost 5 pts while