Goldman Sachs warning: After the VIX surge, the US stock market remains very dangerous for the next 8 days
Goldman Sachs warns that the US stock market remains very dangerous in the next 8 days. Goldman Sachs emphasizes that the volatility on August 5th has historical significance, with VIX single-day volatility exceeding 40 points. Although the trading range of the S&P 500 index has not exceeded 3%, the market is still abnormal. Goldman Sachs points out that the market is expected to remain volatile until the VIX options expiration date on August 21st. In addition, VIX futures liquidity is at historically low levels, which may further affect market volatility. Goldman Sachs believes that passing the key dates will help improve market liquidity
According to the latest analysis from Goldman Sachs' derivatives department, investors should be prepared to face market volatility for at least the next eight trading days. The globally renowned investment bank emphasized in its report that although the markets experienced significant volatility in 2008 and 2020, the market performance on August 5th holds historical significance. This is because on that day, we witnessed the VIX (volatility index) experiencing a single-day volatility of over 40 points, which was unprecedented.
Goldman Sachs reviewed the historical data of the volatility index since 1990, pointing out that when the VIX volatility is between 10-20 points, it is usually accompanied by intraday fluctuations of 5-10% in the S&P 500 index (SPX.US). However, even on a historic day like August 5th, the trading range of the S&P 500 index did not exceed 3%, further highlighting the market's abnormality.
Goldman Sachs explicitly stated: "What we are witnessing is an impact on the volatility market, not on the stock market itself."
The bank also noted that the market is expected to remain volatile until the expiration of VIX options on August 21st. Goldman Sachs believes that considering the significant amount of open options in the market, the expiration of VIX options is more crucial than ever before. Getting through this key date will help release market participants' balance sheets, potentially improving market liquidity.
Furthermore, Goldman Sachs mentioned that the liquidity of VIX futures is currently at historically low levels, which could further impact market volatility