Geopolitical uncertainty continues to shape market dynamics, with recent tariff delays on Mexico and Canada offering only temporary relief. Despite a more neutral gamma profile for the S&P 500, implied volatility remains elevated, reflecting ongoing investor apprehension. The VIX, a key measure of market volatility, has decreased as traders digest the implications of potential policy shifts under the Trump administration. The elevated VVIX and implied volatility correlation among S&P 500 members highlight the market's sensitivity to these developments, particularly with the looming EU tariff announcement. This environment of uncertainty is capping risk sentiment and suppressing aggressive positioning in equities.
The ProShares Short VIX Short Term Futures ETF (SVXY) has responded to these market conditions, rising 1.12% to $50.57 as of 11:00 AM on Tuesday, February 4.