, the so-called fear gauge measuring expected equity price swings, surged at one point the most since the regional bank turmoil in March.P 500 has flipped to negative for the first time in three months – meaning that both Treasuries and shares have tended to sell off all at once.If this inflation-era trading pattern endures, it spells bad news for just about everyone but especially the trillion-dollar 60:40 complex and so-called risk-parity quants.
“The Fed looks like it has more to do. And if so, a lot of the market is a little bit offside. I don’t think positions are huge, but they are not positioned for more hikes.” Still, choppy markets this week pale in comparison to the volatility witnessed last year, marked by double-digit losses across assets and a collapse in confidence in hedging strategies. The SP’s 1 per cent loss over the past two days came after posting gains in six of the past seven weeks and the major benchmarks have unexpectedly posted big rallies this year, all largely thanks to AI euphoria.
Underpinning the shift is a recalibration of bets on the Fed’s rate-rise campaign. On Thursday, Dallas Fed president Lorie Logan said more interest-rate increases would probably be needed to spur meaningful disinflation, echoing the tone in the minutes of last month’s meeting. The rate markets have pencilled in one more increase for this month, but remain split over whether monetary officials will deliver another, as the Fed’s so-called dot plot shows.