2025 Market Volatility Returns to Calm Levels Post-Spring Tariff Shock

On December 29, 2025, Seeking Alpha published an article [4] highlighting a significant decline in market volatility since a spring 2025 shock driven by President Trump’s tariff announcements on April 2, 2025. The CBOE Volatility Index (VIX), a key uncertainty gauge, peaked at $60.13 during the tariff turmoil [0]. By year-end, the VIX fell to $14.20—consistent with historical “calm” market conditions [0]. This decline aligned with a 15.71% S&P 500 rally from March to December, reflecting improved investor sentiment [0]. Bond markets also stabilized: 10-year Treasury yields, which spiked above 5% in April [5], moved into a 4.0-4.2% range by late 2025, indicating reduced fixed-income uncertainty [3][5].

1. Trade Policy as a Volatility Catalyst
   : The April 2025 tariff announcements [1][2] demonstrated trade policy uncertainty’s direct spillover impact across equity and bond markets.
2. VIX-Equity Correlation
   : The inverse relationship between VIX levels and S&P 500 performance remained consistent, with declining volatility coinciding with a strong equity rally [0].
3. Calm vs. Risk Resolution
   : Current market calm stems from the absence of new tariff shocks, not resolution of underlying trade tensions, leaving markets vulnerable to renewed uncertainty [6].

• Risks
  :
  • Trade Policy Volatility: New tariffs or retaliatory measures could reverse calm conditions [1][2].
  • Legal Challenges: An ongoing appeals court case questioning tariff constitutionality may introduce uncertainty [6].
  • Supply Chain Disruptions: Tariff-induced adjustments (e.g., higher U.S. SME production costs) could impact corporate earnings [6].
• Opportunities
  : Reduced volatility may support more predictable market planning, though balanced with awareness of lingering risks.

As of December 29, 2025, the VIX stands at $14.20 (down from $60.13 in spring), the S&P 500 has risen 15.71% since March, and 10-year Treasury yields are stable near 4.14%. Market calm follows the April 2025 tariff shock, but trade policy changes and legal challenges remain risks. Decision-makers should monitor these factors to assess condition sustainability.