Back to View all
Chart of the week

Recent market volatility just the beginning?

Volatility spiked this week as macro questions came to the fore. If history is any guide, volatility could remain elevated as the election heats up.

Subscribe to the Chart of the week newsletter
August 9, 2024 | 2 minute read

VIX and MOVE spike around elections

Line chart showing expected volatility in rates (orange line) and equity markets (black line) steadily rising in the two months before U.S. Presidential elections from 1992 through 2020 and dropping once again after the election has been decided.

Source: Bloomberg Finance, L.P., FS Investments, as of June 30, 2024. Chart measures median changes in expected equity and rate volatility in the months leading up to and after U.S. presidential elections from 1992-2020. MOVE Index refers to the ICE BofAML U.S. Bond Market Option Volatility Estimate (MOVE) Index. VIX refers to the Chicago Board Options Exchange (CBOE) Volatility Index (VIX).

  • A prolonged period of relative stability in equity and fixed income markets ended abruptly last week, driven by a mix of lackluster economic data that called the economic soft-landing narrative into question, shifted Fed rate expectations and catalyzed global market volatility.
  • Markets settled somewhat this week, yet this recent bout of volatility may be the beginning of a new regime.
  • While markets are hyper-focused on whether the Fed can nail the (soft) landing, the U.S. presidential election is poised to keep volatility elevated through the remainder of 2024, as the focus shifts from rate cuts to the election. 
  • In a close race, market and economic outcomes are hard to predict, but one pattern seems clear: U.S. elections have historically triggered volatility. The chart highlights expected equity (VIX) and rate (MOVE) volatility.1 While rate volatility has been more pronounced around elections, both measures trended up during the two months leading up to an election.1
  • Against this backdrop, alternatives may provide investors with differentiated sources of income, growth—and diversification—at a time when markets may continue to face bouts of volatility.

  • Bloomberg Finance, L.P., FS Investments, as of June 18, 2024.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Print this page Email this page

Related Insights

Chart of the week

As small caps return to favor, quality remains a concern

Markets have turned risk-on since the election, as investors again embrace small caps. But 43% of Russell 2000 companies generate negative earnings.

Chart of the week

Private credit yields remain attractive despite Fed rate cuts

Real yields on private credit could remain in their top historical quartile even if the Fed cuts another 75 basis points as markets expect.

Chart of the week

Middle market PE funds outperform through rate hike cycle

Middle market private equity has outperformed mega cap PE since the Fed began to raise rates. It remains well positioned amid a cloudy rate outlook.

Search our site