The Big Number: -48.1%
The percent decline in the CBOE Volatility Index (VIX) since August 5th, the height of the recent escalation in the trade war between the U.S. and China.

What this means
Declining volatility traditionally signifies exhausted bearish sentiment. As measured by the VIX, equity volatility has been trending lower, down -48.1% since the recent August 5th peak. The VIX ended the week at 12.65, well below the one-year average of 17.

Market/Policy Notes
There were positive rumblings coming from the U.S.-China trade talks and, importantly, media reports in both countries suggested progress was being made in what is now being called a “Phase 1” agreement. Breaking news: the Brexit deadline has been extended (again).

The Markets’ Reaction
Equity markets were up with the S&P 500 (SPX), developed markets (MXEA), and emerging markets (MXEF) all climbing about 1.2%. With about 40% of the S&P 500 reporting, better earnings are being rewarded while misses aren’t punished as they typically are, a sign that bearish sentiment may be getting exhausted.

What to Watch
Earnings, of course–a lot of the largest market cap companies report this week. The U.S. Federal Reserve meets on Wednesday and markets expect a 25 basis point cut, the third this year. Preliminary Q3 U.S. GDP is out on Wednesday, the October jobs report on Friday.

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