We had been waiting for an exogenous volatility factor to shake up the incredibly long systematic flows that have been leading to the virtuous circle of risk asset euphoria in recent weeks.
Earlier in the week we got some of that from Japan election which led to a pickup in US$ strength and some modest FX vol
During the week, we had potential blowoff top action in precious metals complex amidst higher volatility as well.
The MOVE index has been grinding higher this week as well.
Oil finally broke lower this morning from an extended multi-month range along with higher volatility.
But we were still waiting for equity volatility to notice.
Well, today it noticed, thanks to Trump who for some reason decided to be a volatility accelerant today. Queue the systematic unwinds.
Summary Takeaways
• Trump tariff threat triggered full-scale risk-off reversal into the weekend.
• Vol breakout confirmed — VIX above 21, VVIX +19 to 119, correlation spiking.
• Bonds and gold firm; USD strong; JPY safe-haven bid.
• Equities sold off across the board, led by MEME (–8%) and Most Short (–4%) baskets.
• Defensives outperformed — clear shift toward safety ahead of holiday weekend and extended shutdown risk.
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