MW 'Fear gauge' spike is swiftly erased after Trump's Greenland pivot
By Jamie Chisholm
The stock-market volatility sparked by the latest Trump tariff row has swiftly subsided.
It's like it never happened.
The spike in the Cboe Volatility Index caused by U.S. President Donald Trump's threat to hit European allies with extra tariffs as part of his push to acquire Greenland has been swiftly wiped out.
The VIX VIX, an options-derived measure of expected moves in the S&P 500, tends to jump when stock markets fall sharply and has therefore become known as Wall Street's fear gauge.
It surged to nearly 21, above its long-term average of 19.5, when the S&P 500 lost 2.1% on Tuesday in response to Trump saying over the weekend that he would penalize NATO allies over Greenland.
"The VIX witnessed a little bit of a reality check as the growing ambitions of the U.S. to acquire Greenland and subsequent tariff threats on Europe pushed the fear gauge to its highest level since November," said Adam Turnquist, chief technical strategist for LPL Financial.
However, following Trump's U-turn on Wednesday, the VIX is down to around the 16 mark as S&P 500 futures move back toward the record highs registered before the latest selloff.
A clue to how quickly options traders thought the latest volatility spike could dissipate was seen in VIX futures, which remained below the VIX over recent sessions, a condition known in trader parlance as backwardation.
Usually, VIX futures are higher than the VIX to reflect the extra risk of holding a longer-duration contract, a condition known as contango. That is again the case on Thursday, with the VIX February future (VXG26) at 18.4, the March contract (VXH26) at 19.3 and the April contract (VXJ26) at 19.95.
-Jamie Chisholm
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 22, 2026 09:31 ET (14:31 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.