I am so hung up on the emerging market theme that it was my first thought when looking at the numbers this week for Russell 2000 and Nasdaq-100 volatility. The Russell 2000 was the weakest of the three US equity market indexes that have tradable volatility markets. The Russell 2000 was off 1.16% last week while the Nasdaq-100 and S&P 500 were down less than half that amount. Emerging markets, as measured by EEM, were down only 0.13% and higher on Friday. All the focus is on how bad the slowing of bond buying by the Fed will impact emerging markets this year, however, the worst equity market index in this group was the one that focuses mostly on domestic markets.
The volatility market results reflect this higher domestic concern as well. The CBOE Russell 2000 Volatility Index (RVX – 22.90) was up over 10% as was the front month Feb RVX Future. VXN and VIX were barely higher on the week. Maybe the pundits are missing the mark and the focus of concern should be on the domestic market and not the impact of tapering on international markets. At least that’s what I come up with when looking at last week’s volatility market changes.