Questor , The Telegraph's investing column, takes a weekly view of the markets – what is moving them, what lies ahead and how all of this could affect your portfolios and financial goals.
Aficionados of British pop music in the late 1950s will remember Move It, the debut and career-launching single recorded by Cliff Richard at Abbey Road alongside his band The Drifters (who in time became The Shadows).
But the Move index – or the Merrill Lynch Option Volatility Estimate to use its full name – is more than capable of striking a chord or two of its own, at least from the perspective of financial markets.
The Move can help investors gauge current sentiment from the perspective of the bond market, and even stock markets, given how influential yields in the former are across the latter. Right now, the Move is rising sharply, and it is important to work out why, as there are several possible explanations.
Greed and fear
The Move index is the US government bond (or Treasury) market's version of the US stock market's Vix index. The Vix (also known as the "fear index") tracks market expectations for volatility in equities, while the Move does the same for fixed income.
In crude terms, the higher the Move goes, the more nervous fixed-income investors are, and vice versa, just as is the case for the Vix and equity investors.
In each case, extremely high readings can suggest that panic is taking over, sentiment is washed out and it may be a chance to buy and pick up bargains. Conversely, extreme lows can imply greed, even complacency, and mean that it may not take much to cause an equity-market correction.
For example, when the US and Israel launched their first military assault on Iran on the weekend of Feb 28, the Move spiked and so did US Treasury yields, especially at the longer end of the yield curve.
Fixed-income markets fretted over whether the war would lead to both higher inflation and higher US federal deficits, the latter because of an economic slowdown, higher defence spending, or both.
Hopes for a peaceful settlement prompted a retreat in the Move, only for the indicator to rise sharply again this autumn.
This could mean the Move is anticipating further hawkish statements and interest rate increases from the US Federal Reserve (Fed), as inflation continues to run hot Stateside.
It could reflect ongoing concerns over the US federal debt, as the war with Iran drags on and speculation about a military escalation continues to swirl – or uncertainty over what this week's US midterm elections could mean for the rest of the Trump presidency.
But what is different this time is how benchmark 10-year Treasury yields are retreating, not rising. This may imply that bond markets fear the Fed will tighten policy too much and prompt an economic slowdown or recession, as more expensive borrowing combines with a resilient dollar, already lofty mortgage rates and sticky fuel prices.
That is a worst-case scenario, given how US equity markets are pricing in 16pc earnings growth from the S&P 500 index's members in 2027, on top of the 30pc-plus expected for 2026. A slowdown or recession would make such numbers much harder to achieve.
No fear
Thankfully, the Vix index does not seem to share those concerns, in a marked contrast with spring when it marched higher in lockstep with the Move.
History suggests the "fear index" needs to go above 40 before share prices start to wobble in earnest – and it stands below its long-term average of 19 at the time of writing.
In plain English, the US stock market still thinks the Iran war will have a peaceful resolution, the Fed can control inflation and bring down interest rates and that corporate profit growth will stay strong.
Major shifts in the Move have only proved telling when the Vix has travelled in the same direction shortly afterwards.
Prior instances of this include 1994's Fed interest rate shock, the emerging market debt crisis of 1998, the global financial crisis of 2007-2008 and the US Federal Reserve's shift to tightening monetary policy in 2022 after inflation finally broke out in the wake of the Russian attack on Ukraine.
Fed watching
Note how unexpected changes in monetary policy, or a perceived loss of central bank control , all prompted the Move and the Vix to rise from overconfident lows.
Financial markets expect three more one-quarter-point rate increases from the Fed to take the headline rate to 4.75pc by Christmas 2027. Sharp moves in the Move could mean those forecasts are changing rapidly, either because inflation is running too hot and more increases are coming, or cuts are on the way because the Fed is trying to provide stimulus, having unwittingly overdone it and squeezed too hard.
Neither scenario would be great for equities, although a slowdown or recession would probably give bonds a firm offer, especially as yields on longer-dated maturities finally offer some return in exchange for risk after more than a decade of doing the opposite.
