The volatility index, otherwise known as VIX, could double within the next 12 months as a result of geopolitical tension and tightening central bank policies, according to ETF specialists at Natixis Global Asset Management.
Brett Olsen, ETF capital market specialist, and Nicholas Elward, head of business development and ETFs in the company's strategic product and marketing group, said the CBOE Volatility Index is at risk of rising higher than 20.
They particularly highlighted the fact the US business cycle is in its late stages and there is US political instability, according to Bloomberg.
"It stands to reason that the market will see a reversion to the mean and find the VIX trading in the 20+ range before too long," they said.
The VIX was trading at around 10.25 yesterday, just above the two-decade low, which it hit in June.
The Natixis duo said the last time the VIX was this low was between 2004 and 2006, and ended in the 2008 recession which was preceded by a sudden jump in volatility.
Although it has remained subdued recently, this has been explained by stronger-than-expected economic figures.
However, Olsen and Elward said risks are building: "With these volatility-increasing risks before us, we strongly believe the VIX could double within a year."
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