Fisher Investments Explains | Are Stocks Disconnected from Tariff Fears?

Transcript

Ben Thistlethwaite

With the market near record highs, stocks may seem a little bit disconnected from ongoing fears, tariff uncertainty and other factors, but this really is an unusual behavior for markets. In our view, political uncertainty has actually eased since the start of the year, and certainly from April's market lows. Markets are once again adapting to this administration's unique style. And to show this, we're showing you a chart that has one measure of expected volatility—the Cboe Volatility Index, or the VIX. The VIX is derived from US options pricing and it tends to spike when investors anticipate bigger swings in stocks ahead. Now, the light blue line shows the VIX jumping during President Trump's first administration, after the initial tariff announcements that we saw in 2018. We see a similar VIX spike earlier this year, and that's in the dark blue line. Now, in both cases, markets eventually adjusted to the heightened tariff rhetoric and trade uncertainties and ended up returning below average volatility expectations— that's the gold dashed line. Now, this isn't to say we're past any risk that tariffs might pose. As always, we will continue to monitor these developments very closely, but the ability of tariff-related news to really derail the market for an extended period of time seems like it's been largely diminished.