A market analyst looks at the evolution of stock indices.Allie Joseph (AP)
Russia's advance in Ukraine drags financial markets.
Faced with the collapse of the European stock markets, which this Thursday have plummeted up to 5%, investors seek shelter in the "armored" currencies - the Japanese yen and the Swiss franc - bonds and gold.
In the midst of an economic storm, the
VIX
index , also known as the “fear index”, has returned to the levels of October 2020, when the markets were at the mercy of the second wave of the pandemic.
This indicator, a point of reference for investors when evaluating the turmoil that the markets are going through, has been around 37 points, the maximum of the year and 18% more than on Wednesday.
A value that reflects a situation of extreme volatility and uncertainty.
This instrument was developed in 1993 by the Chicago Board Options Exchange, the largest options market in the United States, and depends on how much investors are willing to pay to buy options on the US S&P 500 index. In this market,
traders
have the possibility of trading at a fixed price on a given date.
When an investor warns that the stock markets may fall, he usually takes refuge in these financial derivatives to reduce his losses.
Below 10 points, the
VIX
reflects a scenario of relaxation and optimism.
If it stays between 10 and 20, investors start to get agitated.
Instead, the breakout of the 30-point level indicates that nerves are running high.
Analysts agree that after the market has staged one of the biggest rises in history due to the recovery from the pandemic, the geopolitical tension has triggered a lot of volatility.
Diego Morín from IG assures that the situation has been quite hot since the beginning of the year.
"The invasion of Russia has caused a catastrophe in the main Stock Exchanges, something that we already saw earlier this week when Russian President Vladimir Putin declared the independence of the two separatist regions in the east of the country," he points out.
The decision that the countries involved, the EU and the United States will take will be decisive in the movements of the trading floors in the coming days, since the diplomatic channel has been broken for now.
“The moment is critical and we can expect more volatility, also regarding the index
VIX
.
If the West comes into direct conflict with Russia, the tension may rise further,” she adds.
It was in October 2008 when the indicator marked its intraday all-time high, after the bankruptcy of Lehman Brothers.
At that time it reached 89.53 points.
On March 16, 2020, at the beginning of the pandemic, the fear curve spiked again, closing at 82.69 points.
Over the last two years, the coronavirus crisis caused several increases coinciding with new waves of infections, although the spikes were far from the peak recorded when covid broke out.
The pressure of inflation
The roadmap of the central banks, which are preparing to tighten their monetary policy, will continue to influence the volatility of equities, although market observers consider that it is currently in the background.
“All attention is going to be focused on the geopolitical scenario, and the war could be a lifeline for central banks.
If the situation continues like this, they will not raise rates as fast as they planned to do.
Although, inflation will continue to skyrocket, as we are seeing with the prices of gas and crude oil,” says Morín.
The first has shot up 40% this Thursday, while the barrel of Brent oil – the reference in Europe – has pulverized the 100 dollar barrier, something that has not happened since 2014.
Natalia Aguirre, director of Income Analysis 4 agrees with the diagnosis on monetary policy: “If the geopolitical situation worsens, it is likely that the Federal Reserve and the ECB will not want to add more fuel.
Of course, energy prices will continue to run wild and in that case they would be between two fires”.
If the tension grows, those goods imported from Russia and Ukraine, such as corn and wheat, will also become more expensive, and the pockets of consumers will not be immune.
