The announcement of new tariffs set to take effect on February 1 has injected a wave of uncertainty into the US equity markets, prompting a risk-off sentiment among investors. This has led to a significant rise in the Cboe Volatility Index (VIX), which climbed to 16.79, reflecting increased demand for downside protection as traders brace for potential market declines. The heightened fear premium is evident as investors adjust their portfolios, reducing equity exposure and seeking hedges against potential volatility. The broader market's reaction, particularly the underperformance of value stocks and small caps, underscores the anxiety surrounding the economic impact of these tariffs.
The ProShares Short VIX Short Term Futures ETF (SVXY) closed at $50.60, down 1.75% from its previous close of $51.50, as of 16:20 on Friday, January 31.