ConvergEx Group, a leading provider of global brokerage and trading-related services, has released the results of its U.S. Market Volatility Survey, exploring financial industry sentiment about market volatility, the CBOE Volatility Index (VIX) and macro drivers of investor activity.

While almost three-quarters (71%) of survey respondents expect volatility to climb from historically low levels by the end of September 2014, and even more (81%) expect a rise by the end of December 2014, two-thirds (66%) say that market participants are too complacent, or much too complacent. A majority (51%) of those surveyed identified U.S. Federal Reserve policy as the most likely driver of a near-term spike in volatility, far more than the number who named events in the Middle East (16%) or Ukraine (14%). 

"The VIX is often called the 'fear index', and while investors don't seem to be worried right now, our survey respondents say a little fear may be in order," said Tony Saliba, ConvergEx Group executive managing director. "We also have a clear picture of how record-low volatility has hurt the sell-side: two-thirds of banks and brokers say the current environment has been bad or very bad for business."

More than half (59%) of those surveyed call the VIX an accurate or very accurate predictor of short term market volatility, while just 8% believe the index to be "not accurate" or "not at all accurate". Respondents predict the VIX will be at 13.3 by the end of September 2014, and at 14.5 by the end of December 2014.

For more information on the ConvergEx Group U.S. Market Volatility Survey, click here.

Markets Too Complacent  
Respondents feel strongly that investors are too complacent, given historically low levels of volatility. Key findings:

• Too Complacent/Much Too Complacent – Total 66%
  • Much Too Complacent – 16%
  • Too Complacent – 50%
• Not Complacent/Not At All Complacent – Total 11%
  • Not Complacent – 9%
  • Not At All Complacent – 2%

America at the Epicenter
Survey participants overwhelmingly identify U.S. Federal Reserve Policy as the most-likely macro driver of a spike in volatility. Key findings:

• U.S. Central Bank Policy – 51%
• Events in the Middle East – 16%
• Events in Ukraine – 14%
• Foreign Central Bank Policy – 4%

U.S. financial markets were identified as the most complacent, with 75% of respondents singling out U.S. equities or fixed income. Key findings:

• U.S. Equity – 50%
• U.S. Fixed Income – 25%
• International Equity – 9%
• Currencies – 7%
• International Fixed Income – 6%
• Commodities – 3%

Sell-Side Struggles
More than one-third (38%) of all respondents say that low volatility has been bad or very bad for business, but that number jumps to (63%) for the sell-side alone. Key findings:

Bad/Very Bad for Business (All Respondents) – 38%
Good/Very Good for Business (All Respondents) – 27%

Bad/Very Bad for Business (Sell-side only) – 63%
Good/Very Good for Business (Sell-side only) – 12%

Bad/Very Bad for Business (Buy-side only) – 21%
Good/Very Good for Business (Buy-side only) – 42%