"January 2018. The S&P 500 vaulted into late-January record highs while the VIX began creeping up alongside it. Jerome Powell delivered his first hawkish surprise, and within weeks the "Volmageddon" episode tolled a bell on short-volatility trades. The index gave back roughly 10% in nine trading sessions and did not reclaim its January high for seven months."
Equity indexes remain near record highs while bond-market expectations shift toward higher rates. Market-implied odds for a Federal Reserve rate cut fall to about 5%, while odds for a rate hike rise to nearly 22%. Volatility increases alongside stocks, with the VIX climbing to 18.38 even as the S&P 500 trades near all-time highs. The 10-year Treasury yield rises to 4.42%, and CPI accelerates each month of 2026, reaching 333.020 in April. The Fed funds upper bound stays at 3.75% since December 10, 2025, and markets increasingly assume the cutting cycle is over. The same combination of conditions appeared in January 2018 and late 2021 into early 2022, preceding equity declines.
#federal-reserve-policy #interest-rates-and-treasury-yields #equity-market-volatility #inflation-cpi #market-expectations-fedwatch
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