📈 Fear Gauge Surges Amidst Tariff Turmoil: A Deep Dive into VIX and VKOSPI 😨

The recent tariff shocks from the Trump administration have sent ripples through global stock markets, causing significant volatility. As a result, products tracking the ‘fear gauge,’ or Volatility Index (VIX), are seeing increased returns. However, experts caution that this heightened volatility also carries substantial risks.

VIX ETNs Soar 🚀

According to the Korea Exchange, the top-performing Exchange Traded Note (ETN) this month (excluding leveraged and inverse products) is the ‘Korea Investment S&P 500 VIX S/Future ETN (H) B,’ boasting a 33.07% return. The ‘Samsung S&P 500 VIX S/T Future ETN B’ closely follows with a 32.43% return.

These VIX-tracking ETNs are designed to increase in value when the U.S. stock market experiences turbulence. The VIX, calculated by the Chicago Board Options Exchange (CBOE), quantifies market expectations for the S&P 500 index’s volatility over the next 30 days. It’s often referred to as the ‘fear gauge’ because it tends to spike during market downturns.

Wild Market Swings 🎢

The U.S. stock market’s volatility surged following the Trump administration’s tariff announcements. On July 7th, the NASDAQ Composite experienced a wild ride, initially plummeting by 5% before reversing course on rumors of a potential 90-day tariff suspension. However, the White House quickly debunked these rumors, leading to another sharp decline. Ultimately, the NASDAQ closed up 0.1% at 15,603.26.

This rollercoaster resulted in the VIX reaching 46.98 on July 7th, its highest level since April 2020 (50.91).

VKOSPI Echoes the Fear 🇰🇷

The ‘VKOSPI,’ South Korea’s version of the fear gauge, is also experiencing fluctuations. The VKOSPI reflects the expected volatility in the South Korean stock market based on KOSPI 200 option prices, mirroring the behavior of the U.S. VIX. It closed at 37.93, down 14.24% from the previous session. The KOSPI 200 is a stock market index that tracks the performance of the 200 largest companies listed on the Korea Exchange. Despite the daily decrease, the VKOSPI remains at its highest level in five years, signaling continued market anxiety.

Expert Commentary 🗣️

Experts believe that the current extreme volatility in global stock markets may subside soon. Cho Byung-hyun, a researcher at Daol Investment & Securities, noted that the VIX rarely exceeds 40 outside of major crises like the Global Financial Crisis, the COVID-19 pandemic, and the Eurozone debt crisis.

Disclaimer: Investing in VIX-related products carries significant risk due to the potential for rapid and substantial losses. Investors should exercise caution and conduct thorough research before investing.