July 2026
Market Update
US Market Volatility Remains Contained, For Now At Least
(3 min read)
17th July 2026
The first half of the year has continued where 2025 left off in terms of geopolitical issues which have tested financial market resilience. The Middle East, Ukraine, the oil price, fears of inflation, fiscal profligacy and supply chain disruption are among many macroeconomic concerns that markets continue to deal with.
Recent market volatility, rather counter intuitively, has been remarkably subdued given all the above-mentioned factors.
Chart 1 below measures the VIX index which is a real time indicator that measures the US stock market’s (S&P 500) expectation of volatility over the coming 30 days. It is widely known as the market’s “fear gauge”.
Chart 1
United States Stock Market Index (USVIX) over 10 years as at 15/07/26
Source: Google Finance.
As the chart illustrates, volatility is currently in the middle of the long-term range if the periods such as Covid, Trump’s tariffs and the recent Middle East crisis are excluded. Given the uncertainty investors are having to deal with, markets at the headline and index level are performing in an orderly fashion. However, if we look under the bonnet, there are significant divergences of performance and volatility occurring. For example, within the mega-cap technology sector Nvidia and Alphabet have returned approximately +13% year to date while Microsoft and IBM have returned -20%.
Mega-caps have been driven by secular AI growth and have been less sensitive to future interest rate moves given huge cash cushions, while small caps have benefitted from deep value rotation, a robust domestic cyclical economy while dealing with the headwind of possible interest rate rises. Funds investing in different parts of the market in terms of market capitalisation and style are being affected by varying market drivers. This should be a perfect environment for active stock pickers to outperform their passive peers.
The same applies to the bond market and the MOVE index, known as the “VIX for bonds”, which measures expected volatility in the US government bond market. Chart 2 illustrates that the “fear gauge” in the bond market is also well contained, despite concerns about inflation and budget deficits.
Chart 2
Source: macromicro.me
MOVE Index over 10 years as at 15/07/26.
History warns us that there will always be spikes in volatility as unforeseen events or policy errors take place and this uncertainty reinforces strong diversification across and within asset classes, which has been our strategy for clients for some time.
Against a background of constant doubt, however, it gives some comfort that markets do seem to be functioning efficiently.
Peter Geikie-Cobb | Head of Investment Research
Montgomery Associates
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This article and other articles on www.MontgomeryAssociates.co.uk does not constitute an offer or invitation in respect of investments described, nor should it be interpreted as advice or a recommendation. You should contact your financial adviser or accountant for advice relating to your circumstances. The opinions and information in this article have been prepared from sources believed to be reliable at the time and are given in good faith. The information and opinions expressed in this document represent our views at the time of preparation and may be subject to change. The value of an investment and any income from it can fall as well as rise and you may not get back the amount you originally invested.
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