Inside Markets — MOVE Index

The bond market is starting to price-in some election-related volatility with MOVE Index options reflecting an unusually large ~18bp swing immediately following the election. . If realized, that type of volatility would almost certainly spill into equity markets. Increased equity volatility would lead to multiple compression at a time when the SPX is priced at ~21x forward EPS estimates. The CBOE Volatility Index (VIX) measures implied equity volatility with a current reading of 19 still in benign/supportive territory. The VIX has traded below 12 at times during the late spring, which led to accelerated multiple expansion. VIX levels north of 20 starts to become a headwind for rally attempts, while sustained levels (2-3 days) above 30 often take months to unwind. A prolonged period of elevated volatility could result in a significant multiple rerating toward a more reasonable historical average near 15x.