With one central bank meeting down, but two to go, VIX and VSTOXX (Europe's VIX equivalent) have plunged to 2016 lows discounting any 'events' upsetting the complacency anytime soon. However, as Goldman's options strategists note, the medium-term skew (3M to 1Y) are at or near record highs as traders prepare for turbulence amid 'Brexit', US elections, and of course the inevitable 'Fold or No Fold' Fed decisions later in the year.
One month ago, we noticed the latest "shoe to drop" in the global credit rout, when as a result of soaring downgrades to energy companies' credit ratings, the Collateralized Loan Obligations (CLO) market went into a state of frozen animation, leading to a standstill in new CLO issuance.
As we detailed previously, the growth of federal income and employment tax withholdings, the broadest and most timely read on the health of the job market "has been sinking at an alarming rate." What is worse, as ConvergEx's Nick Colas notes, IRS and Treasury data show refunds tracking 2-3% below last year’s levels - not good news for companies that focus on the low-end consumer, the cohort that tends to spend (rather than save) their refunds.
The biggest movers on FOMC days are the Dollar Index, Investment-grade credit, Homebuilders and Real Estate, according to Goldman Sachs' options strategists.
Despite Goldman Sachs "short gold" recommendation - which came within pennies of being stopped out last week - traders, investors, and safe-haven seekers continue to push into the precious metals.