VIX is dead – is the time of bloody greed coming?

Massive Collapse in Volatility

“A 63% drop in the VIX over the last 9 weeks is the biggest volatility crash in history.” (Biello)
The spring collapse following COVID in 2020 was the previous record (58%) — but that occurred over a longer time frame. This 9-week drop is historically unmatched in terms of speed.

Historically, Sharp Rallies Are Bullish Signals

The NASDAQ 100 is just 2% below its all-time high. Just two months ago, it was down 20%. Historically, such sharp rebounds have been bullish signals.

Still Clearly Underweighted

Equity positioning remains weak — at the 26th percentile historically.

Risk-Parity Strategies Not Participating in the Rally

The equity allocation in risk-parity portfolios is in the single-digit percentile.

Systematic Trading Community Overview

The chart shows the notional dollar value of global equity index futures held by systematic traders. Current exposure stands around 5 out of 10.

Tony Pasquariello: “Speculators’ positioning is no longer the strong tailwind it was six weeks ago, but it’s also not a headwind.”

Positioning Remains Balanced

John Marshall, Goldman Sachs derivatives trader: “The put/call ratio for individual stocks is in the middle of its two-year range. This behavior-based metric indicates balanced positioning. The market will likely respond to fundamentals without exaggerated directional bias in the coming weeks.”

Should We Fear the Lack of Fear?

“That would be a valid concern, because fearless investors often create meltups that later turn into meltdowns. However, sentiment indicators suggest sufficient fear, which is bullish from a contrarian perspective.”

Retail Investors Are Sitting It Out

After buying stocks actively in the first three months of 2025, retail ‘buy-and-hold’ investors have paused purchases over the past two months.

Risk Appetite Suggests a Short-Term Peak

DataTrek reports that institutional investors are — surprisingly — quite bullish at the moment. The following chart shows State Street’s Risk Appetite Index, based on portfolio changes from global clients. Big money’s risk appetite recently turned positive, but as of late May, it’s near past local tops for the S&P 500.

DataTrek: “We recognize that risk appetite is already approaching levels typical of a short-term peak. This may materialize later in June.”

Valuations Are Nearly as Stretched as…

Valuation multiples are now almost as elevated as they were at the start of the year.