For today, we decided to present you with a YTD movement of VIX, which has recently surged to levels last time seen during the 2008 financial crisis.

The VIX has definitely been in the spotlight recently as the global markets have seen quite significant volatility. VIX, also known as the fear index, is calculated based on the S&P 500 options and reflects market expectations on volatility in the coming 30 days.

Unlike classic indexes, VIX’s growth represents negative sentiment or increased risk of market volatility. VIX levels over 30 could be considered risky as the market is expecting high volatility. Since the outbreak of the Covid-19 crisis, the US indices S&P 500 and Dow Jones have observed sharp decrease, which resulted with a YTD decrease of 21.3% and 24.2%, respectively. Meanwhile in less than a month both indices observed a decrease higher than 20% (compared to the 52-week peak) witnessing the fastest bear market in history.

VIX Movement YTD

Since, the S&P and VIX are negatively related, the recent market conditions (the combination of Covid-19 outbreak and an oil price war between Russia and Saudi Arabia) have led to a surge in the VIX index. Since the beginning of the year, VIX has increased more than 4.5 times, and currently stands at 65.54. As visible on the graph below, VIX was last time seen at these levels during the financial crisis in 2008. It is also worth noting that the index observed two sharp daily increases this month. The first one was on 12 March, which coincided with President Trump introducing the European travel ban. Meanwhile, on 16 March the index reached 82.69, which is the highest value since the CBOE (Chicago Board Options Exchange) introduced the new methodology for the index in 2003. Note that on Friday it observed an increase of 7.4%, meanwhile S&P 500 has recorded a decrease of 3.4%.

VIX vs S&P500 (2003 – 27 Mar 2020)*

*indexed value relative to base year (2003)