00:00 Speaker A
Markets seem to be shrugging off the latest trade back and forth. My next guest says volatility potholes, as she's calling them, could be ahead in August. Joining me now, Amy Wu Silverman, RBC Capital Markets Equity Derivatives Strategist. Ah, same, same today. We had the same thought on the color there, Amy. Um, good to see you. Um,
00:22 Amy Wu Silverman
Good to see you.
00:23 Speaker A
You know, this has been sort of an ongoing discussion we've been having with you and other strategists just how resilient the market has been, at least on the surface, uh, in the face of these continued tariff threats. Is there anything under the water line, so to speak, that you're seeing?
00:44 Amy Wu Silverman
Look, there is, Julie. I think there is a lot of angst under the surface. One way that we identify that is just, you know, how do option prices, how does volatility look in the future? So maybe not the next month, maybe not the next two months, but even three, four, six, 12 months out. And that's where you do start to see investors demanding protection. There's heightened levels of volatility. We refer to that as the term structure, but it's simply saying that there is a good deal of worry, not necessarily for the summer months as the negotiations are still going on, but longer term, you know, there could be any number of reasons why, but it is much higher than normal. And that actually has been true since Liberation Day.
01:30 Speaker A
And so do you think that there is complacency in the markets right now? And if so, I guess define what complacency is and what the risks are around that.
01:46 Amy Wu Silverman
Yeah, so when you think about it, if if you were an investor who was worried about tariffs, and you had obviously that gap during Liberation Day, but then you really got whipsawed, right? So when the market rallied that hard, you actually were caught offsides. And then you've had difficulty hedging near term because a lot of what Trump says, uh, you know, is subject to negotiation, is subject to deadlines being pushed back. Essentially what's happened is those folks who have been hedging kind of post that rally began have had a hard time. And so it's hard to keep those positions on. You know, that's not necessarily complacency. It's just this turbulence with regard to timing. I would flag that we're going into August, which tends to be seasonally poor for returns, seasonally high for volatility. And August 5th last year is when we got a major volatility pothole with the VIX spiking to over 60.
02:46 Speaker A
Right. The summer has this sort of false reputation of being quiet when it's not necessarily a lot of the time, Amy.
