VIX Hits Trump-Era Low as U.S. 30-Year Treasury Yield Surges to Historic High
nashnova research
The VIX has dropped to its lowest since Trump's second term began, and the MSCI World Index sits within 1% of its all-time high — yet US, UK, and Japanese long-end yields have surged to multi-decade peaks. Goldman Sachs warns the gap between calm equities and convulsing bonds has not closed.
Stocks are calm — so why is the bond market in turmoil?
The VIX has fallen to its Trump second-term low. The MSCI World Index is up 13% year-to-date, less than 1% from its record. On the surface, everything looks fine.
But long-end rates are surging in lockstep: Japan's 10-year yield hit its highest since 1996, the UK 30-year since 1998, and the US 30-year sits at multi-decade highs.
This means → equities are pricing "business as usual" while bonds are pricing "something big is shifting." The two markets are telling entirely different stories.
Have fund managers ever operated at rates this high?
Goldman Sachs partner Mark Wilson noted in his weekly report: most active fund managers today have never run money at developed-market yield levels this high.
In plain terms = their models, risk parameters, and backtests were all trained in the low-rate era — the current environment sits outside their experience set.
This reflects a deeper risk: it is not about whether any single asset is expensive, but that the entire market lacks muscle memory for operating under high rates.
Companies are earning more — why aren't stock prices keeping up?
Wilson pointed out that equity valuation multiples have quietly compressed during the global yield rise. Earnings were "remarkably consistent" in strength, yet that did not translate into matching stock-price gains.
This means → neither explanation is reassuring: either higher rates are directly compressing valuations (the discount-rate effect), or the market is front-running the risk that "this earnings cycle cannot last."
Put simply = companies are making money, but the market is paying less for each dollar of profit — earnings arrive, but the stock price doesn't buy it.
Can the first half's winners keep leading in the second half?
Goldman's "high-beta momentum" basket — tracking the highest-flying, most volatile stocks — has pulled back nearly 50% from its late-June peak, turning negative for the year.
Software stocks have entered the long side on 3-month momentum but remain on the short side on 12-month momentum.
This means → short-term money is chasing software, but the longer trend has not flipped. First-half winners should not be expected to lead in the second half.
What lit the fuse under the bond sell-off?
Fuse one: geopolitics — escalation in the Middle East and the Russia-Ukraine conflict has repriced risk premiums and pushed oil and gas higher.
Fuse two: the AI investment boom — big tech is funding capex with debt, intensifying competition for capital, while creating price pressure in specific sectors of the economy.
Wilson adds a warning: the market's attention is now heavily concentrated on these "right-tail risks" (low-probability, high-impact bad outcomes), which means "left-tail" bullish scenarios — falling oil prices, AI efficiency gains materializing — are being underpriced.
Does the bond sell-off need to stop before stocks can keep rallying?
Fed Governor Christopher Waller reminded markets this week that next week's CPI and PPI releases remain key variables.
Wilson says that whether fixed-income selling stops and yields stabilize is the core precondition for what he calls an "unconditional positive for equities."
In plain terms = the stock market's calm rests on one assumption — that bonds will stabilize. That assumption has not yet been validated, and the CPI print will be the first test.
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