The early days of the new Trump administration have introduced a wave of uncertainty, likened to a "macro black hole," as policy announcements create a chaotic trading environment. The unpredictability surrounding potential tariffs, particularly those speculated to begin on February 1, has left investors grappling with increased market volatility. While equity markets have shown resilience, buoyed by the absence of immediate tariff implementations, fixed-income and FX markets exhibit caution, reflecting a heightened sensitivity to rapid policy shifts.
This environment of entropy has led to a notable impact on the VIX, a key measure of market volatility. Despite the potential for increased volatility reminiscent of Trump's first year in office, the market's current low risk premium around tariff deadlines suggests skepticism about the immediacy or impact of these policies. As of 10:01 on January 23, the VIX stands at 14.86, slightly down from its last close of 15.10, indicating a tempered response to the ongoing policy uncertainty.