Geopolitical uncertainty continues to weigh heavily on the equity markets, with recent tariff delays on Mexico and Canada offering only temporary relief. Despite a more neutral gamma profile around the 6,000 level for the S&P 500, which suggests reduced dealer hedging needs, implied volatility remains elevated. This is reflected in the VIX, which indicates ongoing investor apprehension amid persistent policy uncertainty under the new Trump administration. The elevated VVIX and implied volatility correlation among S&P 500 members further underscore the market's sensitivity to potential policy shifts, particularly with the EU tariff announcement looming. Traders are increasingly focused on political developments, as traditional economic indicators like the ISM manufacturing PMI and construction data have elicited minimal market response. The Fed's patient stance in the face of fiscal policy unpredictability has also shifted attention away from economic data, with market participants more concerned about the next moves from the White House.
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) experienced a decline, dropping 2.40% to $43.99 at 11:00 AM on Tuesday, February 4.