“In short, investors and U.S. equities have what a New York couples therapist might call a ‘Constructive relationship based on trust, forgiveness, and shared values,'” Colas added.
Additionally, the strategist points out that the so-called VIX of major industry sectors from the S&P 500 are also down over the past month. For instance, financials show a 10.4% lower VIX now versus last month, tech stock implied volatility is 5.5% lower over the same period. The Financial Select Sector SPDR (NYSEArca: XLF) was down 0.2% over the past month while Technology Select Sector SPDR (NYSEArca: XLK) gained 1.2%.
However, fear is rising in the emerging markets, which showed a 10.5% increase in their VIX, but the volatility may be due to a mix of concerns over Chinese asset prices, Colas said. Meanwhile, fixed-income assets, specifically corporate bonds, are also experiencing a rise in volatility driven by concerns over large fund outflows.
For more information on market volatility, visit our volatility category.