Investment Idea

VIX on low levels might go up on a weaker Q1 reporting season

12 Apr 2022 | 3 min read

The Ukraine war has taken on diminished importance from the perspective of the stock markets. Instead, the focus is shifting towards the upcoming Q1 2022 reporting season, where earnings estimate for the S&P500 companies is coming down. Investors are also watching interest rate developments, with U.S. two- and 10-year yields inverting last week.

On Wednesday, March 30, statistics showed that annual inflation in the Eurozone rose from 5.9 percent as of February 28, 2022, to 7.5 percent on March 30, 2022. The outcome was almost one percentage point higher than anticipated. Energy remains the primary driver of inflation.

Meanwhile, U.S. short-term interest rates have now passed ten-year interest rates. It could indicate an expected economic slow-down within a year. But it could also mean that investors no longer believe that the Fed will be able to fulfill all its rate hike announcements.

Weekly Comparison between the U.S. 5-year and 10-year yields, Week 52/2021 to Week 13/2022


Last week ended on Friday, April 1, with 426,000 new jobs created in the U.S. during March. Although this was below the analyst's forecast of 480,000 new jobs, it is still a decisive outcome. It illustrates that the U.S. economy is still running at a good pace.

Number of 1,000 new jobs in the U.S. April 2021-Mar 2022 – Outcome and Forecast


We saw reasonably limited price movements on the world's stock markets last week. The Shanghai stock exchange was the relative best performer, with the index up about 3%. The worst performer so far this year of the index in the chart below is the OMX30, down 11.7% in 2022. So far this year, the London Stock Exchange (FTSE) has been the best performer. Investors prefer it since the FTSE index has a high proportion of food and pharmaceutical companies with lower cyclical exposure.

Meanwhile, some anecdotal stories suggest that industrial companies in Europe already face a challenging environment. These range from supply disruptions to skyrocketing input and component prices. The latter is also easily linked to the weak performance of the OMX30 index with its many major industrial companies.

Significant stock indices performance on Monday, April 4, 2022, in one week and this year


Worse Q1 report outcome could lift the VIX

As we wrote a few weeks ago, the war in Ukraine has now begun to be encapsulated by the stock market.

The company reports for Q1 2022, which will start to arrive in a wide range in just about two weeks, will now likely capture investor interest. Wall Street analysts have revised the forecast earnings growth in Q1 2022 from 5.7 to 4.7 percent since the beginning of the year. That would make it the quarter with the lowest earnings growth since Q4 2020.

According to the expectations, engineering and consumer discretionary companies should reduce their profits by 11% in Q1 2022. The weak and uncertain outlook for the companies in the industrial sector mentioned earlier is the same in the United States as in Europe. However, the sanctions' effects on Russia are more visible in Europe.

The VIX index measures expected volatility in the month ahead. VIX has come down from highs of around 38 just under a month ago to 19.2 at writing. The likelihood of a VIX break to the upside, i.e., a slight increase in expectations of rising volatility, may be considered more significant than a further fallback.

S&P500 Volatiliity (in USD) from October 1, 2021, to April 4, 2022

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The VIX is also at low levels in a longer, five-year perspective. It does not seem entirely justified given the ongoing war between two of Europe's major countries, while the earnings outlook for the U.S. stock market's companies is revised downwards.


S&P500 Volatility (in USD) five-year chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.


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 of numbers 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


This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.