key definitions
- risk premium
- extra return investors demand for bearing uncertainty.
- flight to quality
- flows into Treasuries, dollars, gold in stress.
- tail risk
- low-probability high-impact events underpriced until they are not.
VIX is imperfect but correlates with equity drawdown depth and hedging demand.
commodity shocks from war interact with sanctions and shipping — not one factor.
early-1990s uncertainty
Gulf conflict and recession nerves.
- policyuncertainty.
- oilspike.
war scares can lift vol without immediate earnings resets.
VIX averages elevated versus mid-90s.
CBOE
late-1990s calm
vol suppressed until equity stress returned.
- fedsteady.
- riskcomplacency.
low vol encourages leverage — fragility builds unseen.
VIX trended lower on average.
CBOE
dot-com unwind
equity crash lifted vol persistently.
- equitiesbubble unwind.
- fedcuts.
persistent vol changes factor premia — not just level of S&P.
VIX structurally higher than late 90s.
CBOE
2004 to 2007 calm
great moderation narrative — cracks underneath.
- creditCDS tight.
- subprimebrewing.
calm vol + leverage = ugly skew.
VIX mostly muted pre-crisis.
CBOE
2008 to 2020 shocks
GFC, Europe, taper tantrum, COVID.
- liquiditycrashes.
- policybackstops.
policy truncates left tail but does not remove uncertainty.
VIX spiked hard 2008 and 2020.
Fed
2021 to 2026 rates + wars
inflation regime, Ukraine/Mideast headlines, AI rotations.
- ratesvolatility.
- geopoliticscommodity premia.
geopolitical risk layers on top of macro vol — hedges cost more.
VIX averaged above great-moderation lows.
CBOE; GPR
stylized VIX annual path — substitute CBOE data or GPR index when maintaining.
earnings visibility falls first; multiples compress second.