📊💱Volatility Factor Underperforms in August: Cable FX Macro

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• Historically, August is a month associated with increased stock market volatility. Since 1990, the VIX, which measures expected 30-day volatility of the S&P 500, has risen by an average of 8.4% in August, making it one of the most volatile months. J.P. Morgan Research noted that the VIX had a median of 19 year-to-date in 2025, compared to an average of 21, and expected it to decline moderately to 17–18 by year-end, indicating a potential stabilization or slight decline in volatility during August.

• Drivers of volatility have been a more clear path for trade policies, Federal Reserve potentially easing as soon as September, softer than expected U.S. inflation, and an easing of geopolitical risks (Israel-Iran conflict not turning into a wider clash).

• All of this is pushing the volatility factor lower on the month, our basket is down 2.1%, which is in line with spot vol performance. If the usual August seasonality had played out, volatility would have been up and taking the vol FX factor with it. Carry is underperforming, but this is due to the NZD longs taking a hit on the RBNZ. Alternative high yielders are playing performing against low yielding currencies.