Markets expect a diversification miracle
SPY•Historical warning signs for investors
Historically, volatility goes hand-in-hand with falling prices. When the opposite occurs, it usually signals an unsustainable speculative frenzy, as seen earlier this year with gold, or with Micron’s South Korean rivals, SK Hynix 000660.KS, SKHY.O and Samsung Electronics 005930.KS, since last month. Whether index volatility rises from here or single-asset volatility falls - or, more likely, both - investors are clearly mispricing risk.
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Low correlations across markets and sectors
What explains this historical anomaly? Some analysts blame the AI craze: memory chip maker Micron Technology MU.O adding $700 billion in market value since March certainly boosts single-stock volatility. Yet rapid rotation between tech and the broader market was more a 2025 feature, when leadership between the S&P 500 Index .SPX and Nasdaq changed on 15 of every 21 trading days, compared with 10 now. Furthermore, a similar volatility pattern appears in markets with little tech exposure, including the FTSE 100 Index .FTSE, Germany's DAX .GDAXI, and France's CAC 40 .FCHI.
