📝 Equity, Credit And FX Volatility Have Further Room For Upside: Westpac Strategy

Key volatility metrics move from their 2021 lows versus the

average increase over the last four recessions.

• The standout message is that with the exception of fixed income markets, there is further substantial

upside for volatility before it’s more in line with typical “recession pricing”.

• Some markets are closer to recession pricing than others though. The lift in G10 FX implied volatility from

its 2021 lows is almost within striking distance of hitting recession averages.

• But equity and credit volatility have considerable upside to go, even allowing for recent jarring moves. The

VIX index has settled around 35 in recent weeks, up substantially from cycle lows around 15 in 2021. But

in the last four recessions the VIX index peaked 2 ½ times above pre-recession lows.

• As recession risk continues to build the recent run up in equity, credit and FX volatility looks to have further

room on the upside.

- Westpac Strategy