The Great Volatility Disconnect: What Wall Street Is Missing
The great volatility disconnect
Something unusual is happening beneath the surface of equities. Defensive sectors are showing bubble-like behavior, US earnings moves keep exceeding what options price in, and Europe is paying up for volatility that rarely materializes. Meanwhile, the semiconductor washout is creating interesting upside opportunities, while AI weakness is increasingly trading like a growth shock. BofA's latest work reveals a market where the biggest risks aren't necessarily where investors are paying to hedge them.