[video] Quick Take: A 'New Normal' for Volatility
NEW YORK (TheStreet) -- The CBOE Volatility Index (VIX.X) continues moving lower on Tuesday. Mark Sebastian, head of trading at Swan Wealth Advisors, told TheStreet's Jill Malandrino that with the VIX down 6.5% to $14.28, he's "shocked" to see the stock market react to the current situation in such a bullish tone.
Recent economic data have been quite weak and the Federal Reserve plans on keeping its monetary policy unchanged, he said. He attributed the rebound in U.S. equities to the stabilization in the Japanese yen and in emerging markets.
However, the days of the VIX trading at or below $12 may be gone. According to Sebastian, the "new normal" for the VIX may very well be in the $14 to $16 range.
He added that the long-term "normal" is near $17.50, while the actual long-term mean is closer to $20.To put it simply, equity markets are "normalizing" near current levels, Sebastian said. The VIX has been highly volatile, as expected, jumping from $14 to $21 and back to $14 all within two weeks.
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