The closed at just 13, which is a very low level heading into a that I think is as important as this one, given the trends we’ve been seeing in the and . On the surface, the equity market doesn’t seem concerned about this report in the least. It also means that, unless implied volatility really ramps up overnight, the odds of a post-jobs-report volatility crush are unlikely.
Meanwhile, Kalshi is betting on 140,000 jobs being created in the June report, and that estimate has been steadily trending higher over the past few days. In some ways, it feels similar to what we saw heading into the May jobs report just a month ago, when expectations were also relatively low.
It is worth noting that 21-day realized volatility is now trading above the Index. That doesn’t mean much by itself, especially if realized volatility in the continues to move lower. However, a sudden jolt could push the VIX significantly higher. Based on that historical spread, we could easily see the VIX move back to 22.
Meanwhile, the rose slightly on Wednesday and failed to surpass the July 3, 2024, low. This was due to a sharp decline in semiconductor stocks. The dropped by more than 5%, and it has clearly been the leader of both the market and the dispersion trade for some time.
It is hard to say what will happen next because semiconductors are inherently volatile. However, with implied correlation this low and index implied volatility very low relative to single-stock implied volatility, you could certainly see a situation where a hot jobs report triggers a surge in the VIX Index and a fairly sharp unwind of the market’s dispersion trade.
Additionally, a hot jobs report would likely trigger further dollar strength and push interest rates higher. While that would almost certainly weaken the and the , if this is truly about a broader regime shift, those weaker currencies carry trades are unlikely to be major factors.
Finally, today will mark the first day of the Treasury bill net issuance calendar for July, and it will be a heavy one at that.
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