'Spot Up, VIX Up' As Investors Hedge Record Highs In U.S. Equities

2026-04-27 14:39:00 ET

By Ed Tom

Cross-Asset Volatility: Implied volatilities increased across asset classes last week amidst the geopolitical overhang created by the instability of commercial transit along the Strait of Hormuz and mixed signals from Iranian hard-liners undermining the country’s appetite for a resumption of peace talks. Equity, rates, credit, and FX implied volatilities all posted modest gains (see Exhibit 1), with the VIX® Index ending the week 1.25 pts higher at 18.7% - despite the fact that the S&P-500 has rallied to record highs for a YTD return of +4.7%. Although the entire Treasury curve has shifted higher ahead of this week’s FOMC meeting, interest rate volatility remains muted, with the VIXTLT currently trading at 14 percentile lows. (The Fed Funds futures markets are pricing in Wednesday’s meeting as a complete non-event with a 99.9% probability that the Fed keeps rates unchanged.) Oil volatility continues to trade at elevated levels, with WTI 1M implied volatility ranging near 90th percentile highs as the Strait of Hormuz closures / blockades continue to disrupt oil commerce, driving oil prices +$13 to $96/bbl. Upside oil skew has moderated slightly but still remains inverted throughout the front 6-month tenors – reflecting the risk of a prolonged supply dislocation. Gold volatility has eased from record highs in March to its 63rd percentile on the back of the metal’s two-month long consolidation....

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