Anyone who's been following the VIX lately may feel a little like they've just been on the SheiKra at Busch Gardens. From its high of 29.40 on March 16, it has dropped precipitously to 17.91 in just 7 trading days; a level it has not been at in a month. Is this a sign a renewed faith in the market by investors or a miscalculation of the economy's risk ahead?
Historically, the VIX is at lows even in the face of multiple disasters from the European crisis to the devastation in Japan. It's been suggested that these “black swans” are so commonplace now as to be priced into the market and options activity seems to corroborate this theory. It seems that it takes a much larger unanticipated event to affect traders these days.
The lack of volatility means investors have bought in anticipating more gains. While the economic data being presented indicates positive growth, there doesn't seem to be a trigger to spark any significant rally, while there are plenty of hiccups around the world that should give traders pause at the very least. The question of whether this growing immunity to global events is misplaced or not remains to be seen.