Uncertainty lurks beneath the surface

As autumn turns to winter and 2026 approaches, we recognise an asymmetric opportunity to add long-volatility exposure, driven by several factors. The ongoing US federal government shutdown, which began on 1 October 2025, has had an impact on volatility so far, with news surrounding tariffs causing the VIX to soar several times in October. Furthermore, bearish sentiment has become more prevalent recently, due to concerns over bubble-like conditions in the AI and AI-related technology sectors. Spikes in the VIX reaching above 20 were also observed in November. Third, while November tends to be a down month for the VIX, seasonal patterns indicate that December and January tend to see higher uncertainty. Overall, November may be a good month to take a long volatility position.

Thr failure by the US Congress to pass either full-year appropriations or a continuing resolution by  October 1, triggered a partial federal government shutdown involving mass furloughs. Between October 1 to October 10, fourteen Senate cloture votes failed to advance a funding bill, prolonging the impasse. In an unprecedented escalation, the White House ordered agencies to prepare for permanent staffing cuts as a negotiating tactic. More recently, efforts have been made to end the shutdown. The Senate passed a resolution to end the record-long shutdown by a majority vote of 60–40. However the House of Representatives still needs to approve it, and then the president must sign it into law before the shutdown can finally end. This deal coincides with overall turbulence in the markets.

Last week, the technology sector — particularly US AI and AI-related stocks — experienced a sell-off due to widespread concerns about inflated valuations. This market turbulence coincided with warnings from prominent figures in the financial sector. For example, Goldman Sachs CEO David Solomon predicted a 'likely' 10–20% correction in the equity market within the next two years. Similarly, both the International Monetary Fund and the Bank of England have issued warnings. Bank of England Governor Andrew Bailey specifically highlighted the risk of an AI bubble. In a CNBC interview, Bailey stated that, although AI offers "very positive productivity", this could be offset by uncertainty surrounding the future earnings of tech companies. 'We have to be very alert to these risks,' he stated. Despite these concerns, some European companies are capitalising on the AI boom. Legrand, a French firm that supplies cooling systems for servers to companies such as Alphabet and Amazon, has seen its stock price surge by 37% this year — a rise comparable to that of Nvidia. The uncertainty surrounding the sector may continue to exert upward pressure on the VIX.

Over the last 15 years, the VIX has shown signs of seasonality. During this period, its value has decreased in 11 out of 15 years. On average, the VIX has fallen by 6.77% in November. Excluding the four positive years, the average decrease observed in negative Novembers was around 18.7%. Conversely, December and January have tended to be good months for the VIX, with average gains of 5.82% and 8.71% respectively over the last 15 years. 

Bearing the above in mind, we expect the VIX to drift from the mid-teens to the low 20s as political risk persists, turbulence continues in one of the hottest tech sectors, and seasonal trends take effect.

Hopefully, the longest ever shutdown of the US government, which has lasted some 40 days, is now coming to an end. This follows enough Democrats voting alongside Republicans in the Senate to secure the required 60% majority needed to approve a new government budget. On Monday November 10, the S&P 500 and NASDAQ increased by 1.5% and 2.2%, respectively.

By Friday, November 7, around 455 companies in the S&P 500 had announced their third-quarter 2025 results. According to Earnings Insight, 82% of these companies reported positive earnings surprises and 77% reported positive revenue surprises. The three S&P sectors with the best performance in terms of positive earnings surprises in Q3 2025 were Health Care, Consumer Staples and Information Technology, with respective percentages exceeding analysts’ estimates: of 93%, 93% and 92%.

By Friday November 7, 87 Swedish OMX companies had announced their Q3 results. Of those, 64% exceeded the market's consensus expectations, and 53% surpassed revenue forecasts. 

On Wednesday, November 12, the Danish company Lundbeck and the American company Cisco will announce their quarterly results. Also on Wednesday, Germany's October Consumer Price Index (CPI), Redbook's weekly retail sales data for the US, and the US Department of Energy's weekly oil inventories will be released. OPEC will also publish its monthly oil report.

On Thursday November 13, Alibaba and Tencent in China, Siemens and Deutsche Telekom in Germany, and Walt Disney in the US will report their quarterly results. The week's macroeconomic news will begin with the UK's Q3 GDP figures and September's industrial production data. This will be followed by Eurozone industrial production figures for September and the IEA's monthly oil report. The US will also contribute to the day's news with October's Consumer Price Index (CPI) and initial jobless claims data. 

On Friday November 14, Sweden's Nibe, Norway's Orkla and Denmark's Bavarian Nordic will report their interim results, as will Germany's Allianz. The week's macroeconomic news will begin with a series of releases from China, including housing prices, industrial production and retail trade figures, as well as investment figures, all for October. From continental Europe, we will receive German wholesale price data for October, as well as French and Spanish CPI data for the same month. Furthermore, the eurozone will release its trade balance for September, as well as its employment and Gross Domestic Product (GDP) figures for Q3. From the US, we will receive producer price index figures, retail sales figures for October, and figures for unsold goods inventory for September.

The OMXS30 looks better than most

The S&P 500 remains in a strong bullish trend. However, momentum is fading, with the index trading just above the 20 Day Moving Average (MA20). If it breaks below this level, 6,600 may be next. In the event of improved momentum, however, the index would need to break above 6,900 to reach new highs. Keep an eye on 6,600 but stay calm.

Following a pullback, the NASDAQ-100 is holding at the 25,150-support level, although momentum is fading. The next level to watch is 24,750 followed by the 100 Day Moving Average (MA100), which is currently at 23,916. Conversely, short-term upside potential is found at the previous high of around 26,000.

The German DAX index has regained momentum, bouncing back above the 200-day Moving Average. The index is currently testing the resistance level of 24,000. If it breaks above this level, the next target could be 24,475. Conversely, if the bears return, the index may trade downwards towards the 200-Day Moving average.

Of the four stock indices we are investigating, the OMXS30 may look the most exciting, as the index is approaching a previous high of around 2,800. If it breaks above this level, the ceiling of the rising trend channel will serve as resistance.

The full name for abbreviations used in the previous text:

EMA 9: 9-day Exponential Moving Average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day Moving Average

MA50: 50-day Moving Average

MA100: 100-day Moving Average

MA200: 200-day Moving Average

MACD: Moving Average Convergence Divergence