Markets Prepare for Escalation in US Election Volatility

August 31, 2020 15:30

Traders are facing the month of September taking for granted that volatility will skyrocket in the coming weeks, as the date of the US presidential elections approaches (November 3). These are elections that have generated great uncertainty, since the polls are not giving a clear winner. Meanwhile, the coronavirus pandemic continues to advance and leaves great unknowns about its effects on the economy.

How will the markets be at the start of September? The month of August has been marked by new all-time highs in the main Wall Street indices and by the rally of technology stocks. Some increases include the split of Tesla and Apple shares, which will change the composition of the Dow Jones.

The futures of the S&P 500 VIX index point to increases in the month of September when they could reach around 27 points, while today this index traded near 24 points at 10 am (CEST), which already reflects some concern.

Source: Admiral Markets MetaTrader 5. VIX CFD Daily Chart. Data range: from December 31, 2019, to August 31, 2020. Prepared on August 31, 2020, at 10:30 a.m. Keep in mind that past returns do not guarantee future returns.

In the month of March, during the worst of the coronavirus pandemic, the VIX exceeded the level of 84 points, a value that in its history it only surpassed during the financial crisis of 2008, when it touched 90 points. It is now a long way from those levels, although futures do point to increased nervousness in the markets.

In addition to the proximity of the presidential elections, the month of September has several key events that will affect the markets and increase volatility:

  • This Friday, the Non-Farm Payrolls (NFP) and the US unemployment rate will be released
  • On September 15 and 16, investors will have to keep an eye on the Federal Reserve's FOMC meeting, after Jerome Powell announced a few days ago that the Fed will be flexible with the inflation target, set at 2%.
  • The Quadruple Hour Witch will occur on September 18, which is the quarterly expiration of futures and options on indices and stocks.

We will be keeping a close eye on these events as we monitor the markets throughout September.

Admiral Markets UK Ltd allows you to trade CFDs on the VIX future from the Trade.MT5 trading account. The expiration of the CFD contract on the Volatility Index Future is 1 month. Therefore, the trading positions are automatically closed at the end of the contract. You can start trading by opening a live trading account by clicking on the following banner:


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