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Posted August 13, 2025 at 12:41 pm
In this week’s midweek market update, Scott Bauer joins Jeff Praissman to break down the VIX’s sharp drop below 15 and what it could mean for investor sentiment. From retail earnings to the upcoming Jackson Hole symposium, they explore whether today’s market calm is a sign of stability—or the setup for a sudden shake-up.
The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.
Hi everyone, this is Jeff Praissman with Interactive Brokers. It’s my pleasure to welcome back to the IBKR Podcast Studio Scott Bauer from Prosper Trading. Hey Scott, how are you?
Jeff, never better. How are you?
I’m great. I love having you come in on our Wednesday midweek market podcast.
And for our listeners, Scott Bauer is the CEO of Prosper Trading. You can find more from him on our website, as well as at prospertrading.com. But you know what, let’s just get to it. As we always do, we’ll talk about the past five days and look ahead.
Looking back from last week, the S&P 500 rebounded pretty sharply after the previous week’s sell-off. What factors do you believe contributed most to this recovery?
I really think there are three things. Number one, the potential de-escalation between Russia and Ukraine—the talks that President Trump is going to have with Putin. That took a little edge off the market.
Number two, the tariff situation is probably not as bad as many people had anticipated.
And number three, the CPI report. Even though CPI bumped up a little bit, it was not worse than people had expected, and the market really took that in a pretty positive light.
Is it fair to say these are three pretty positive things—more of a shift in investor sentiment versus technical positioning?
Oh, it certainly seems like it. I think if you look at some of the retail option flow, especially, it’s bullish.
And we—I know the VIX is near and dear to your heart—and we saw it last week fall below 15 again after spiking above 22 earlier in the month. What does this rapid volatility compression tell us about institutional positioning and the risk appetite in the current market?
Institutionally, there is complacency out there that we hear about all the time. I would tell you that’s different than what traders on the floor are thinking and other traders that I know. The complacency scares them.
On the institutional side though, with the VIX down here below 16—and I know it actually fell into the 14 handle—boy, that is the lowest we have seen in a really long time. Again, that just shows that maybe the wall of worry we had earlier in the year is no longer there. I think that’s something to really watch for.
And speaking of the VIX, we spoke offline—what have you seen today?
For the first time in a while, we’re starting to see some pretty heavy upside call buying into the VIX. Not just August or September, but actually now going out to October and November. Perhaps that is positioning based on the next Fed meeting in September—who knows what’s going to happen there.
So I think, for the first time here, maybe as we just talked about, some of that institutional positioning, which has been really complacent and really bearish vs. bullish market, maybe they’re now starting to hedge a little bit.
We looked back, and I want to look ahead next—maybe say eight to 10 days. We’re chugging through earnings season, but we have retail earnings coming up on the calendar over the next 10 days with Walmart, Target, and Home Depot all reporting. What metrics are you going to be looking for within these stocks?
I think it’s going to be really interesting to see what these big guys say about the consumer. There are some reports just out recently that say 42% of consumers report buying fewer products—not just fewer products, but trading down a little bit. So maybe they would buy one brand, but now they’re buying the generic brand.
In fact, 27% in this study say consumers are switching to generic brands. I think the pattern of the consumer is going to be really important—not just for what they did this past quarter, but for what the big retailers—the Walmarts, Targets, Home Depots—say about what they may see. And of course, the tariff impact.
Summers are usually a little bit slower—though this summer seems to be an anomaly—but we are heading into a traditionally low-volume period in late August. If that holds true, how would reduced liquidity affect market movements, especially if we get some unexpected news, which we seem to always get during this timeframe?
Absolutely—if there’s an event that really affects the market and we’re in one of these lower-volume scenarios, you could see a bigger move than expected just because of the lower liquidity. They call it the “dog days of August.”
But don’t forget, we’ve got Jackson Hole coming up next week and what may come out of there. We all know the focus on Jerome Powell is pretty solid right now.
That leads me perfectly into my last question. With the Jackson Hole Economic Symposium coming up on August 22nd, what messages from the Fed Chair could significantly move markets, and how are sophisticated investors positioning ahead of this key event?
I think they have to be a bit cautious. We’ve seen—I’m not going to say hawkish—commentary from Jerome Powell. He has stuck to the mantra of watching the jobs data and watching signs of tariff-driven inflation. The Fed definitely has more data now than they did at the last announcement, so I think this is going to be really pivotal to hear what he has to say.
The market’s certainly going to be watching for any cue that maybe he’s shifted to a little bit more dovish stance.
Scott, this was great. We always appreciate you swinging by for our Wednesday podcast. For more from Scott, you can visit our site, go to Education, look for past podcasts, or go to prospertrading.com and check out Scott and his team there.
Thanks a lot for having me, Jeff. I’ll see you a couple of Wednesdays from now.
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