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The VIX is low. So what?

Volatility is not predictive of future returns.

Nicolas Rabener
10 min read
22 Sep 2025

SUMMARY

  • Some investors increase hedging when the VIX is low
  • However, future returns were not negative when volatility was low
  • Investors should also not be concerned about high volatility

INTRODUCTION

Since U.S. President Trump launched his tariff war in April 2025, equity markets have rebounded, valuations have returned to record highs, and the VIX has declined. This combination is making some investors uneasy, as tariffs are generally expected to weigh on economic growth. Concerns are further compounded by a lack of fiscal discipline of the U.S. government and the resulting upward pressure on U.S. interest rates.

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