Another "Thunder" Struck the US Stock Market: Traders Front-Run November Midterm Elections as VIX Futures Flash Warning Sign

BlockBeats News, August 25th. Despite Nvidia's financial report and Fed Chair Kevin Wash's Jackson Hole speech remaining the focus of the market this week, traders have already begun preparing for market turbulence brought by the November U.S. midterm elections. Cboe data shows that the VIX futures term structure has risen significantly, with the September contract around 17.4, October rising to 19, and November further increasing to 19.7.

Historical data shows that midterm election years are often accompanied by higher stock market volatility. Since 1945, in midterm election years, the actual volatility has been higher than the previous year 80% of the time, with an average increase of 3.5 percentage points; the average return of the S&P 500 in midterm election years is only about 4%.

This year's special risk lies in the AI investment frenzy. As divisions within both parties are emerging over substantial capital spending on AI infrastructure, the election results may not only affect the Congressional landscape but also directly impact the current hottest AI investment themes in the U.S. stock market.

Cboe has launched S&P 500 daily options expiring on the election day and the following day. The current market implied pricing shows that the S&P 500's expected single-day volatility on November 4th, the day after the election, is about 1.4%.

It is worth noting that the VIX closed at 15.8 on Monday, still significantly below the long-term average of 19.4, indicating that the current market volatility and hedging costs remain low. Analysts believe that the market is pricing in election risk in advance, but the real risk may not yet be fully reflected in asset prices.