Yo Pit Crazies,

Sixty-eight.

That’s the total number of trading days in the entire history of the VIX where it closed below 10.

Out of roughly 8,000 trading days since the index was created in 1993, the market has only been that calm 68 times.

And 52 of them happened in a single year.

I’ve traded through all three of those windows. Each one felt permanent. Each one ended violently. And every time someone tells me they’re waiting for the VIX to get back to single digits before making a move, I ask them the same question: what makes you think it’s coming back?

Because right now, nothing in the macro picture says it is.

Every Calm Needed a Cause

Low-volatility windows don’t just happen. Every single one required something massive to suppress fear across the entire market. Not a good earnings season. Not a rate cut. A fundamental shift in the structure of the global economy.

In December 1993, the VIX dropped to 9.55. The Cold War had officially ended two years earlier. The Soviet Union was gone. The internet was beginning to take shape. Deficit reduction had passed, and bond markets rallied hard, meaning investors were so confident in the future that they accepted lower returns on safe investments. America was the sole superpower with a new technology boom forming, unemployment falling, and interest rates dropping. That combination of geopolitical calm and economic tailwinds created the first true low-vol window.

It happened again in 2006 and early 2007. Five years had passed since September 11. Housing prices were climbing. The economy was growing. Market participants had convinced themselves that new financial products had eliminated risk by spreading it across so many investors that no single failure could cause damage. We know how that ended.

Then came 2017. Tax reform. Deregulation promises. Corporate earnings accelerating. The VIX hit its all-time low of 8.56 on Black Friday 2017 and produced 52 sub-10 closes that year, more than every other year in history combined. Markets were so calm that when the VIX finally spiked in February 2018, it wiped out an entire class of funds that had been designed to profit from selling calm, essentially collecting pennies in front of a steamroller until the steamroller showed up.

The Conditions That Keep Volatility Elevated

Look at what those three windows had in common: falling deficits or fiscal reform, declining interest rates, and the resolution of a major geopolitical threat. Now look at the current environment.

Federal deficits are running well above five percent of GDP, which means the government is spending far more than it takes in, and that gap is getting wider. For context, deficits averaged 3.8 percent over the past 50 years. Government debt is on track to exceed the World War II peak within the next decade. Interest rates remain elevated, with the 10-year Treasury, the benchmark that influences everything from mortgage rates to corporate borrowing costs, hovering above four percent.

That kind of fiscal pressure keeps a floor under volatility. Think of it this way: when there’s less uncertainty in the world, investors accept lower returns because they’re confident the future is stable. When uncertainty is high, whether from trade disputes, leadership transitions at the Fed, or massive government borrowing, investors demand to be paid more for taking risks. That demand for compensation shows up as higher volatility.

None of that is a recipe for calm. Every low-vol window was built on a foundation of stability. We don’t have that foundation.

So what does this mean for your trading? Stop building strategies that assume the VIX is going back to 10. It might, eventually. But the macro conditions that would produce it, some combination of fiscal discipline, geopolitical calm, and falling rates, aren’t forming. The VIX has spent most of the last couple years grinding between the mid-teens and low twenties. That tells you the market agrees.

The lesson isn’t that low volatility is coming. The lesson is that when it does come, it’ll be driven by something you can identify, not something you have to guess about. Right now, there’s nothing to identify. Trade the volatility you have, not the volatility you wish you had.

Good trading,

Andrew