The puzzle in capital markets during the past several months was extremely low stock market volatility (vol) combined with relatively high bond market vol.

Bond vol jumped after the election and remained high well into January before falling off sharply. The CBOE Volatility Index (VIX) of options on the S&P 500 remained close to multi-year lows before an uptick this morning.

In fact, the two measures belong to different worlds. Bond vol rose because the market didn’t know what the Fed was going to do, and fell when the answer turned out to be “not much of anything.” VIX remained low until traders began to fear that the Trump trade was coming to an end.

We don’t think the fat lady has sung about the Trump trade yet–tax reform is much more important than health care, and easier to pass Congress.