The VIX traded above 20 for a fifth straight day and is now north of 24.
That’s the zone where policy-induced shock waves have tended to surface and, notably, where they’ve also been reversed by some degree of policy response.
You can see it in the timeline on the chart: euro and U.K. bond market shocks, the SVB episode, the yen carry unwind, tariff uncertainty.
Adding to the trade war escalation of recent days, today we get some stress bubbling up in the banking complex. The KRE (regional banks) fell more than 6%. Gold rose 2.5%, now up ~11% in nine trading days.
The questions: Is this move in gold the acceleration of the fiat-debasement trade? Or is it a safe haven bid — on a potential fire where there’s smoke in regional bank credit, or on a broader liquidity issue/shock brewing?
Jerome Powell said on Tuesday, “some signs have begun to emerge that liquidity conditions are gradually tightening.” Translation: the Fed sees the cracks forming.
The market seems to be sniffing out both scarcity of liquidity and scarcity of sound money.