On Friday, the market's barometer of volatility, known as the "fear gauge," surged to its highest level in over five months. This spike was fueled by a significant adjustment in the anticipated U.S. interest rate cuts and rising geopolitical conflicts.
The CBOE Volatility Index, also recognized as ^VIX, experienced a notable increase, reaching 21.33 at its peak. This move surpassed the critical threshold of 20 points for the first time since late October 2023, highlighting growing investor apprehension.
Amid these market movements, geopolitical strife escalated as Israel conducted an offensive on Iranian territory. This action intensifies the ongoing confrontation between the two nations, pushing the region closer to broader conflict and driving investors towards safer assets.
Contrasting with the market's unease, recent data from the U.S. suggests a robust economy. Consequently, expectations for Federal Reserve rate cuts have been scaled back to around 40 basis points from the initial projection of approximately 150 basis points at the year's start, as per LSEG data.
The repercussions of these developments have been felt across the board, with the S&P 500 index declining over 4% through the month, trimming its year-to-date gains to around 5%.
