American stocks reach new record highs with volatility the lowest in a decade

Jasper Jolly
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New York May Fall Behind Other Cities As World Financial Capital
The bulls are ruling the roost on American markets (Source: Getty)

Volatility on Wall Street has fallen further to hit its lowest level since before the global financial crisis as American indices rise to new record levels.

The S&P 500 touched a new all-time high at 2,403.87 points as it opened on Tuesday, while the Nasdaq Composite index rose to a record 6,133 points before paring slightly.

Becalmed markets around the world are enjoying a period of perceived low political risk after the easy victory of Emmanuel Macron in the French presidential election, which saw the threat of the anti-euro Marine Le Pen recede.

Read more: Macron rally sees markets gain $290bn

The Vix index, sometimes known as the “fear index” for US stocks, fell to 9.56, its lowest intraday level since December 2006 on Tuesday, according to the Chicago Board Options Exchange (CBOE) which compiles the measure.

The Vix measures the 30-day volatility of stocks traded on the S&P 500, which has seen sustained buying despite a tense political climate over the past year. Meanwhile shorter-term volatility over nine days fell to even lower levels of 8.91.

Volatility levels have spiked over the past year when investors have been confronted by major political turbulence. During the global financial crisis volatility rose above 80, while the Brexit vote in June saw the Vix spike to above 26.

Since then, however, a strengthening US and world economy as well as Trump’s supposedly business-friendly policies have boosted the valuations of America’s biggest companies.

Read more: Trump's tax plans are a tailwind for these big tech trends (and companies)

Trump’s plans to slash the corporate tax rate would almost certainly lead to higher profits for big firms, while investors have seemingly discounted the possibility of the President passing damaging trade restrictions after his own Republican party stood in the way of healthcare reform.

Trump had promised massive taxes on imports in an effort to force US companies to bring jobs onshore, which would have dented profits at a diverse range of firms, from retailers who import in large quantities to manufacturers of products abroad such as Apple.

However, the President’s tax plan, presented on a single page of paper, did not mention the so-called border adjustments tax. Treasury secretary Steven Mnuchin said the plans for border adjustments were not ready.

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