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A closely watched gauge of U.S. stock market volatility fell to its lowest level since the start of the coronavirus pandemic, even as investors worried about the direction of interest rates and inflation.

The Vix index, which measures the implied volatility of S&P 500 options over the next 30 days, fell to 13.5 this week. That was the lowest since late January 2020, just before the pandemic shut down economies around the world and sent financial markets into a panic.

The Vix has fallen from its peak in October despite rising interest rates, the collapse of several US regional banks in March and widespread uncertainty about the future path of inflation, which remains well above the 2 percent target set by many central banks on both sides. Atlantic Ocean.

Led by several tech stocks, the S&P 500 returned to bull market territory last week, defined as a rise of 20 percent or more from the most recent low hit last October. It last fell more than 1 percent in a single day on Feb. 3, Refinitiv data showed.

A line chart of the Vix volatility index showing that stock market volatility has fallen to epidemic levels

However, the market’s lull may not last long. “Typically, when investors are so complacent, volatility increases in the coming weeks,” said James Demert, chief investment officer at Main Street Research.

Others argue that the Vix is ​​no longer fit for purpose, given the growing popularity of short-term trading and derivatives, known as zero-day-to-expiration options, in particular. The 1-day volatility index was launched in response in late April and has since fallen 4 percentage points, suggesting that even on this score the stock market is far from worried.

Bond markets are relatively volatile. The Merrill Lynch Option Volatility Estimate (Move), which links the Vix to stocks, in March was “flirting with levels typical of a crisis,” said Kevin Tozet, a bank member. French asset manager Carmignac Investment Committee.

The Move index has fallen nearly 70 percentage points over the past two and a half months to 115, but remains 65 percentage points higher than it was at the start of 2021 and above its 10-year average of 75.

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