Market volatility reflects AI trade anxiety ahead of Mag 7 earnings, says Cboe's Xu

Volatility Analysis - SIBO Global Markets notes that individual stocks exhibit higher volatility compared to the overall market index [2] - The spread between the single stock volatility index (VIX EQ) and the broad market volatility index (VIX) recently reached an all-time high, indicating heightened anxiety around earnings and valuations, particularly for high-flying AI and tech stocks [3][4] - The VIX EQ index primarily reflects the volatility of the top 80-90 stocks in the S&P 500 by market cap, excluding meme stocks with extraordinary volatility [7] Options Market and Investor Sentiment - There has been a noticeable increase in hedging demand, with investors buying downside protection, especially for year-end, to secure year-to-date gains [9] - The one-month options pricing for the SPY ETF (tracking the S&P 500) suggests an expected move of 3% in either direction, with the cost of at-the-money calls or puts being 1-15% of the ETF's value [14][15] - The VIX one-day index, reflecting the next 24 hours, prices in approximately 80 basis points for the upcoming CPI data, indicating relatively low expectations for significant market movement [17] Bond Market and Economic Outlook - The bond market indicates that the Federal Reserve may prioritize a softening labor market over inflation risks, leading to a decline in real rates [12] - The loosening of financial conditions, even before potential Fed rate cuts, has been supporting positive performance across various asset classes [13]