The volatility index (VIX) hit a 5-month high Tuesday trading above 14 for the first time since August 2017, as global equities and bond markets continued their rocky start to the week.
After finishing at record highs Friday, all three major U.S. indices fell more than 0.5% Monday, and have extended losses in pre-market trading Tuesday, with the Dow Jones Industrial Average (DJIA) leading the sell-off, down over 200 points at the time of writing. For bondholders, the slide began January 9, when the benchmark 10-year Treasury yield traded through 2.5% for the first time since March 2017 and has since added 20 basis points to trade above 2.7% for the first time in nearly four years (bond prices move inversely with yields).
The spike in volatility comes as investors are getting set for a busy week on the economic calendar headlined by Wednesday's Federal Reserve meeting, where officials are set to leave the fed funds rate unchanged, but with the bond market sell-off gaining pace, pundits will be eyeing forward guidance from the committee.
Stacked either side of the Fed meeting is President Donald Trump's State of The Union speech, manufacturing and confidence data, and Fridays's all-important nonfarm payrolls report.
The Investopedia Anxiety Index (IAI) that is typically in line with the movement in the VIX, also currently reveals high levels of investor apprehension with an 'extreme anxiety' reading on the market indicators. The IAI is constructed by analyzing which topics generate the most reader interest at a given time and comparing that with actual events in the financial markets. It breaks down investor anxiety into three distinct categories – 1) macroeconomic; 2) market; and 3) debit and credit.
The pickup in volatility has flown through to other markets with most major cryptocurrencies beginning the week on the back foot. Bitcoin prices are back below $11,000, down over 8% since Monday's open, and have lost close of half their value since December's spike above $19,000. While Ethereum has moved back below $1,150. (See also: Fraudulent Trading Drove Bitcoin's $150-to-$1000 Rise in 2013: Paper)
For safe haven investors the news is a little brighter with Gold prices continuing to climb, trading back above $1,350 an ounce, up more than $50 since the beginning of 2018, while oil prices continue to surge, making a three-year high Monday, trading above $65 a barrel. (See also: The Bond Market is Trying to Warn Us of Trouble)