After a subdued summer, volatility returned last week, sparked by a sharp selloff in European bonds and rising political uncertainty in France, Germany, and the U.K. In France, snap elections have raised questions about fiscal direction given its debt now stands at 113.9% of GDP, meanwhile Germany faces growing political instability and persistent economic stagnation; and then to top it off, U.K. Yields on 30-year British government bonds briefly shot up this week to their highest since 1998. These tensions weighed on European assets and helped drive a short-lived spike in equity volatility, including a 10% move in the VIX - though most of that has since unwound. In this issue, we examine global equity performance across global regions and highlight the areas showing signs of relative strength amid the shifting macro and political backdrop.
Equity Markets in Flux: Emerging and Commodity Markets Gain While Europe Pulls Back
The recent SIA heat map performance data reveals distinct regional trends in global equity markets, with Asia and surrounding areas showing relative strength, the Americas presenting a mix of outliers and laggards, and Europe exhibiting broad short-term weakness.
In Asia and adjacent regions, China Mainland (FLCH) has posted a 31.90% year-to-date gain and 15.08% over the past quarter, indicating strong momentum across timeframes. South Korea (FLKR) has returned 41.84% YTD, supported by a 16.65% quarterly gain, though weekly movement was limited. Africa (AFK) stands out with a 45.25% YTD return and 16.24% for the quarter, marking one of the highest performances across all regions. In contrast, India (FLIN) is flat across most periods and Indonesia (EIDO) has reported consistent declines, including -1.05% YTD and -0.73% quarterly. Other markets in the region, such as Thailand, Taiwan, and Japan, have produced moderate but less pronounced results.
In the Americas, Peru (EPU) has led performance globally, with a 43.90% YTD gain and strong returns across weekly (5.75%), monthly (15.82%), and quarterly (18.87%) periods. Argentina (ARGT) is positioned at the other end of the spectrum, with -13.74% over the quarter and -5.82% YTD, making it the weakest performer in the data set. The United States (FLQL) has shown a 12.96% YTD gain, though its weekly return was slightly negative. Canada (FLCA) has delivered consistent mid-range returns, including 6.04% monthly and 19.92% YTD.
In Europe, recent data indicates a broad rotation out of the region. Spain (EWP) and Poland (EPOL) remain top performers on a year-to-date basis, with returns of 53.10% and 53.67%, respectively. However, both recorded negative weekly performance, at -1.34% and -2.54%, respectively. Germany (FLGR) has declined 2.50% over the quarter, and other markets such as France (EWQ) and the U.K. (FLGB) have posted weak short-term figures. The declines align with ongoing political uncertainty in key countries: early elections in France, coalition tensions in Germany, and the U.K.’s bond woos. These developments have coincided with reduced short-term equity performance in the region.
The overall picture reflects shifting short-term momentum and varied performance across regions, with several emerging and commodity-linked markets showing strong recent gains, while European equities are registering broad near-term declines despite prior strength earlier in the year.
Volatility Signals: Balancing Alertness and Composure
Recent volatility data shows a short-term spike followed by a rapid reversion across major U.S. equity volatility indices, reflecting stress from the European bond selloff. This past week, the CBOE SPX Volatility Index (VIX.I) rose 10.10%, its largest move in months, while the CBOE DJ Industrial Average Volatility Index (VXD.I) and CBOE NASDAQ-100 Volatility Index (VXN.I) climbed 6.13% and 5.35%, respectively. These moves coincided with turmoil in European debt markets, which unsettled global sentiment and prompted renewed hedging activity. Despite this spike, volatility remains significantly lower over longer timeframes. The VIX.I is still down 28.23% over six months and nearly 20% over the past month, reflecting a broader summer trend of declining volatility amid soft inflation, steady earnings, and light trading volumes. Year-to-date and multi-year data confirm this subdued environment, with all three indices showing negative returns and 3–5 year declines in the 13–15% range. Markets continue to digest shocks quickly, pricing in risks only briefly. In summary, the recent volatility surge appears reactionary and temporary, highlighting market sensitivity to global bond developments—especially in Europe—while the broader trend favors calm unless further rate or policy disruptions arise this fall.
The attached point and figure chart (scaled at 5%) of the CBOE SPX Volatility Index (VIX.I) offers a measured view of market sentiment. Since the spring spike, the VIX has formed a downward-sloping flag (see black lines) throughout the summer of 2025. Although the index spiked this week, it remains within the flag’s boundaries. A move to 19.55 could signal an early warning of increased equity market volatility, while a breakout above the red line at 22.63 would more clearly indicate a shift toward a defensive investor stance. Support is noted at 13.89, a very low level that may reflect either market calm and investor comfort or a degree of complacency where risks could be underestimated, potentially leaving markets vulnerable to unexpected events. Advisors might want to set alerts for any breakouts, which can be easily done on the SIA platform. Staying attentive to these key levels may help advisors respond swiftly as market dynamics evolve.
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