Following the recent interest rate shift in the United States, the most important event of this year is approaching in early November: the presidential election in the United States. While political impacts may be short-lived in other countries, the influence of the election outcome across the Atlantic on Wall Street is significant. Ultimately, the U.S. election is likely to receive considerable attention worldwide. For traders, volatility is particularly interesting. It’s not only high in election years but is likely to increase sharply just before the election.
Investors Dislike Risk
Volatility is often referred to as the “fear index”, and for good reason. As historical volatility rises, so does market risk. And as is well known, investors don’t like this. The relationship between the VIX volatility index and the S&P 500 is clearly visible in the first graph. As volatility increases, Wall Street declines and vice versa. Recently, volatility has been slightly declining.
