Risk Reversal in Stocks as S&P 500 Volatility Passes Small Caps
- Russell 2000 volatility below VIX for six days since August
- Appeal of domestic businesses has kept small-caps afloat
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How unpredictable is the U.S. stock market right now? It’s a place where the Standard & Poor’s 500 Index, a collection of the world’s most stable companies, is suddenly bouncing around more violently than small caps.
Since stocks started selling off last month, implied volatility, the options-derived measure of turbulence codified in the VIX, has repeatedly risen above a similar measure tied to the Russell 2000 Index of smaller stocks. It’s closed that way six times since Aug. 24, compared with twice in the prior 11 years.