Joe Colletti
Welcome to Strategic Alternatives, the RBC Capital Markets podcast. In today's episode, we're listening in on a conversation between Amy Wu Silverman, our Head of Equity Derivative Strategy, and Ben Fisher, U.S. Equity Sales Specialist, recorded at RBC’s Global Financial Institutions Conference in New York.
Amy and Ben discuss the forces shaping market volatility today, from geopolitical tensions and energy market uncertainty to the shifting outlook for software and private credit – they explore whether the VIX is truly reflecting the risks investors are navigating beneath the surface, and what could trigger a move to a more sustained high volatility environment.
Now, let's dive into the conversation.
Ben Fisher
So Amy, I want to start, like, super big picture. There's a lot to talk about. But, real simple question, do you think the VIX is representing the real risk out there right now, or do you think it's under price? And if so, what are the ingredients that you would see for the VIX to kind of break out of this kind of five-year range that we've seen.
Amy Wu Silverman
Well, it's great to be here with you, Ben, and I think that's a great question to start with, because it kind of frames a lot of the angst that I think we've seen under the surface. Year to date, the SMP is still only down, what like a percent and a half under 2%, it's really stunning when you sit back and think about it, because there's been so much headline risk, there's been so much noise, but we've been saved to some degree by this zigging and zagging that's in the market. So you might have software getting destroyed, but then you'll have another sector that's doing well. Some people call it Halo, maybe defensive cyclicals. But the point is, all this has been going on under the surface. It has not really impacted your index level volatility, which, at the end of the day, the VIX is just a weighting of S&P-implied volatility. And that's why, you know, even though we kind of we got to that 30 handle during the headlines in Iran, it's still been, like, fairly muted, and we've still kind of fairly followed the playbook of, essentially what happened with Russia, Ukraine. So perhaps we're announcing that the war with Iran is over, but I don't know if Iran agrees with that or not. And so the point is, you, you have volatility following this kind of five-year playbook of folks are feeding it, because geopolitically, that has been the precedent that makes sense. And I understand people's inclination to go there, but you do have this risk that this dispersion, which has really helped you structurally, is not going to stay with you forever. And so I do think we need to watch for that spike in correlation.
Ben Fisher
What would you be watching where you're just like, Okay, we're going back to that real volatile environment, back to a 40-plus VIX. What would make you worry that that's going to happen?
Amy Wu Silverman
Maybe I'll start with the fundamental risks first, which was, let's just take the whole geopolitical situation out for a moment. Even prior to Iran sort of being the top of the news headlines. We already saw issues with software, obviously, with a lot of investors asking the question, what happens when terminal value is existentially questioned? You did see options, especially on the downside, really reflect bearish sentiment. It's just that, because there are other sectors that were reflecting bullish sentiment, you again, you had that relatively subdued index level volatility. Now I would say from here, those still remain questions. But on top of that, there are going to be real impacts, even from the short time where we've had issues in the Strait of Hormuz, even from the short time where we've had kind of bleed-on effects from the temporary spike in correlation we've had. And then outside of that, I think there's a longer term arch of, what does this do to rates action in play, and what does this do to longer term growth and inflation? So I think they're all still there. You have seen a decent amount of monetization of folks who were long hedges, and they've monetized that. It's very much the 2022 playbook. However, there is this little bit of complacency. Because the other thing people remember about 2022, this was my favorite stat for a long time, was the market drew down about 20% but a systematic put buying strategy actually drew down 21%, you probably remember me saying that back in 2022 and so there is this again, this fear that we're going to underperform on these hedges. That's why they get quickly monetized.
Ben Fisher
You've been saying for a while that people have been more fearful of that right tail FOMO chase than they have of the left tail downside chase.
Amy Wu Silverman
Yeah, I think that's part of it. And then maybe, let me ask you a question, Ben, because you've been at the financials conference where we're doing this podcast from, and you mentioned to me off air that you were just at one of the BDC meetings, which I guess is the hot ticket this year, not so much in the past few years. So I'd love to hear from you what you've been hearing from companies and from clients, and just what the sentiment is just right here at the conference itself.
Ben Fisher
I think the worry is…what the CEO of Citi Citigroup, Jane Frazier, said was, look, right now, like all these macro worries and isolation are not really affecting, like, growth numbers, econ growth, like we don't see it in credit markets, which would be like the real worry. But she's like, What happens if the AI angst, the private credit angst, and then the Iran angst all kind of converge at once, then you probably get that big draw down. The clients that I speak to, obviously this, like extreme volatility has made it extremely difficult to make money in, quite frankly, just because of the rapidity of the moves, and just the quick nature and just having to be forced to trade headlines.
Amy Wu Silverman
So maybe a follow on for you. Software obviously took a huge hit, and the IGV is down substantially, probably one of the worst performing sectors year to date, unlike the S&P. How are you thinking about that now when you have conversations with research analysts, with clients? Are people getting out their shopping lists, or is it still wait and see – the still, the angst is presiding over everything.
Ben Fisher
These risks are real. Like, if you look at anthropic numbers, if you look at open AI as numbers, and the fact that they're private, and they can just kind of give these, like, big picture numbers, like, makes it more difficult, but they are accelerating growth. Like, meaningfully. So these risks are very real. I will say that the sentiment has gotten better within software. These open AI models, they need software. And they're just like, look, this the whole coding aspect of software, like we already assumed that that was going to be commoditized out to zero, but they're going to need to partner with software companies if they want to succeed. But as you know, narrative over like reality, oftentimes drives stocks and volatility more than you know, more than anything. And right now it's just a matter of, convincing you know, investors that this terminal risk issue is going away, which is very difficult to do, but it is, interesting because, I still get a lot of skepticism on software, and that kind of makes me feel like the recent software rally probably has legs, because, almost to a man that I talked to, or woman, they think that they're the secular risks are still out there, and they're still pretty negative. And ultimately, price drives investing. And if you know, they'll start to get a FOMO rally, like kicking in, and they'll have to reallocate to the sector in some way.
Amy Wu Silverman
Yeah, maybe I'll share an interesting historical study that we did on this topic. Because I think when the initial software sell-off happened, there are all these headlines that software is essentially your newspaper stocks of the Internet era. And the interesting takeaway is from the late 90s, it took most of the newspaper companies until almost 2008 to be fully disrupted. To me, that's just so much longer than I think you would have intuitively said without going back and looking at the data. And then there are very specific instances. So I'll give you one. The New York Times, where not only is this company currently trading at all-time highs, they managed to transition themselves. So yes, they were a newspaper, but now what are they? They're a podcast. They are a game app, and they're digital. And there are other companies where the slew of M&A, I thought was so interesting. There was a slew of M&A – lot of these companies actually got taken out privately. And these companies actually got taken out at premiums. Now, what was interesting is the companies that then took them out themselves had bankruptcies, but it was sort of like you did have opportunities to make money. And maybe the final thing I'll say on this, that I think is counter intuitive, is we kind of ask the question, well, what happens to the volatility of these companies? Right? So if there is this existential question that terminal value is perpetually at risk, then, to some degree, there's no earnings that can save you. There's no near term catalyst that's going to fix the problem that fundamentally people are worried about your ultimate DCF, right? But what's interesting is, because a lot of these companies became takeouts, your terminal value was actually assured, not highly volatile. So the term structure and the volatility of these companies ended up being the opposite of what you would have intuitively said, because ultimately they became takeout candidates, and usually in a cash takeout, your terminal value is actually assured. So I just thought that was really interesting food for thought, because when people tell me, software is the next newspaper, I say, Well, okay, that might be true, but a lot of newspapers ended up making money until the great financial crisis.
Ben Fisher
Just sticking with that for a second though, what is the options market signaling for software companies, and, if you have it, like for the BDC private credit players?
Amy Wu Silverman
I think to some degree, the market and the narrative got a little lost, because obviously Iran became front and center. But what had become very interesting is essentially what we do is we'll take the different BDC constituents, so for instance, in the BDC ETF, and the same thing for the constituents of the IGV, and we just say, where are normalized SKU levels now versus a year ago, two years ago, two years ago, five years ago. And so that's essentially asking the question, like, where has sentiment gone? And prior to, I'd say, Iran being the headline news, they were all bottoming. I'd say the pushback from clients would be like, Well, Amy, you know, of course, they're bottoming because the stocks are down so much, like, usually when the stocks are down so much, there's like nothing left to hedge. We've already had the drawdown. I would tell you that's not necessarily true. So meaning, when we had that first initial drawdown in IGV and the constituents, skew is still very high. And I will tell you right now, in the market, even though we're getting a reprieve on the Delta side, on the S&P side, skew hasn't budged all that much, and it's the market's way of telling you through options, that even though we might have some temporary relief, we're not like okay yet with the longer term issues. And what has changed recently, in the last one or two weeks, is, that has become more the case for IGV, but it is still not fully the case in the BDCs. So, I think that's interesting, because ultimately, we're talking about the same underliers, but they're very different asset classes, but in the IGV constituents themselves, you are seeing, I would say the sentiment shift, but not so much yet in the BDCs.
Ben Fisher
Yeah, I think software bulls are probably wishing that this war will not end, because I feel like it's, everyone's attention has turned to kind of the geopolitical risks versus software. And, they're buying some time, but the fear is, once the geopolitical stuff dies down, they'll come back to the secular issues around software.
Amy Wu Silverman
So maybe, I'll throw a question back at you, Ben, because it's certainly been in the headlines. Are you in the camp of we've alleviated largely the concerns in the energy market with the recent comments on Iran? Or are you more in the toothpaste can't go back in the tube, the eggs can't get unscrambled? I'd love to hear, kind of the sentiment you're feeling from the desk and from clients as well.
Ben Fisher
You know, I hear both from clients that one, like, the risk is we now have, like, a structurally higher floor on oil, and you can't put the toothpaste back in the bottle on a lot of things, some more bullish are saying, like, Look, if we can remove this player, Iran, who's been obviously a bad actor for decades, the longer term picture on oil, and obviously in conjunction with what happened in Venezuela, then maybe this has been, like a secular change, change for the good. So, near term people are really just trying to figure out the duration of this war. Because the duration of this war, if it continues, then you start to again, worry about, like, the real economic data getting hit, like, GDP getting hit, and then we start to get a growth scare, and then we get, like, a real draw down.
So, why don't we end with, you know, we can never have a conversation with Amy, with silver and without talking about the retail investor. Curious like, obviously, the retail investor has consistently, and shockingly, to a lot of people, just bought the debt, like they just seem to have endless pockets and no risk event can dissuade them from buying the dip. So, have you seen that in the options market? A. And B, what happens if they don't buy this debt? What does that mean for overall volatility and for market risk in general.
Amy Wu Silverman
It's so funny, because when I would say we were at the height of angst, so VIX hitting over 30 and sort of every day being news about oil and Iran, I thought to myself, retail is not going to buy this, are they? And I was wrong. Boy, was I wrong. It's just so fascinating to me, because it's become so important because it's become the most stable leg of the stool. And if you're an institutional investor, in the past five years, you have really had to reframe risk. This isn't even about some sort of outside kind of ad hoc actor. This is like you really have to reframe your distribution. And the way I would think about it is it's no different than when a company is deploying, like, a massive stock buyback, right? You've effectively cut off part of the tail, because you have someone who's supporting it, essentially through a put option. And this is what retail has become. It is so stunning to me. And I would say, I would watch two things in the future. The first is, how do prediction markets start to influence everything and anything we see? Because, I will tell you, as a derivative specialist, it's very interesting to me because prediction, options were the were the GOAT. Options were the original prediction market. You wanted to make a prediction on something, you went to the options market, but now there's this more kind of specific, more marketable prediction market. And it's very interesting to me how that will begin to interplay with the actual options market itself. Obviously, the liquidity situation is very different. It's not somewhere for institutional investors to play. But, maybe just a recall back to our volatility 2026 outlook, which was, I still continue to believe what? It's not something that scares away retail. It's something shinier that they might decide that they want to play with instead. That, to me, is sort of one risk. And the second is, you just simply have a generation whose left tail anchor is different than ours. This is a generation whose left tail is arguably what, covid, maybe? And so what is the lesson? The lesson is you always own the right tail and FOMO Momo is perpetually the more real risk. We saw it during this conflict with Iran, we'll continue to see it, and it's probably what is ultimately going to save our paddling duck.
Ben Fisher
Are you saying that the options market is potentially going to go the way of software and be replaced by the betting markets? Are you worried about that?
Amy Wu Silverman
I think the options markets are going to start doing predictions. So essentially, they'll do more binary options, rather than having kind of the American, European style that's dominant today…
Ben Fisher
If you can't beat them, join them kind of thing.
Amy Wu Silverman
Maybe if they build, if you build it, they will come zero DT, right.
Ben Fisher
That seems like a separate podcast. We'll save that for the next conference. Well, thanks for being with me, Amy.
Amy Wu Silverman
Thank you.
Ben Fisher
I'm sure we'll speak again soon.
Joe Coletti
Thanks for listening to Strategic Alternatives, the RBC Capital Market’s podcast. This episode was recorded on March 10, 2026. Listen and subscribe to Strategic Alternatives on Apple, Spotify, or wherever you get your podcasts. If you’d like to learn more or continue the conversation, please visit rbccm.com/strategic alternatives, or contact your RBC representative.
See you all next time.
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