Gordon: The VIX is a touch lower than it should be with so much uncertainty

VIX Call Spread Strategy - The firm is buying VIX call spreads expiring in September as a hedge against market uncertainty, particularly around the Jackson Hole event and potential announcements from JPAL [1][2] - The strategy involves buying 23 strike calls and selling 29 strike calls, costing approximately $1 for a $6 spread, with a maximum return of $5 [2] - The firm views the VIX as potentially undervalued given the current level of uncertainty [2] Market Outlook and Risk Management - The firm expresses more concern about the upside of the market, using the VIX call spread to provide confidence to investors to hold AI-related technology investments [4][5] - The firm suggests that if JPAL takes a hawkish stance, it would reduce holdings in offensive, alpha-driven names in technology, communications, and some industrials within the portfolio [8] - The firm acknowledges the strong performance of the technology ETF (XLK) and emphasizes active portfolio management [9] Fed Policy and Market Impact - The report mentions a decrease in the outlook for a Fed rate cut, dropping from 80% to 70% [6] - The firm believes that any market weakness has been bought up due to many investors remaining on the sidelines [10] - The firm anticipates Powell addressing the Fed's communication strategy and approach to inflation over the next 5 years, potentially leading to quicker rate hikes [10][11]