The U.S. equity market has been experiencing the highest level of volatility in several months. This is no surprise considering the list of current geopolitical events:
- Israel – Gaza
- Russia – Ukraine
- ISIS terrorist movement
Also, with volatility at extreme lows, it really had no where to go but up.
The chart below of the VIX (known as the “fear index”) illustrates the recent spike in volatility and the lull in preceding months.
- The forward PE ratio on the S&P is in the 16x earnings range, far from a valuation bubble.
- The yield curve is quite positive (short term rates are paying near 0%, the 10 year Treasury bond is yielding 2.42%, and the 30 year Treasury is yielding 3.23%.
- 90% of S&P 500 companies have reported their Q2 earnings, and so far so good; the annualized growth rate is coming in at about 8.4%, significantly beating earlier estimates.
- GDP figures for Q2 are coming in at over 4%, more than wiping out the negative numbers for Q1.