Market volatility has surged, and this is not good news for the US stock market.

Amidst the downgrade of the US rating by Fitch and the resulting sharp decline in the US stock market on Wednesday, market volatility has returned. The important volatility index, VIX, soared, reaching a two-month high of 17.42 on Thursday, with an accumulated increase of 32% from last week's low. On Wednesday, the US government's unexpectedly large-scale debt issuance plan, the surprisingly strong "mini non-farm" ADP employment data, and the downgrade by Fitch intertwined, delivering the heaviest blow to US stock investors in months. The Nasdaq fell more than 2%, marking its worst performance since February, while the 10-year US Treasury bond yield, known as the "anchor of global asset pricing," reached a nine-month high. The market initially continued the panic from Wednesday in early trading on Thursday, but calmed down somewhat by midday. In March of this year, the bankruptcy of Silicon Valley Bank triggered a crisis in the US banking industry, causing a brief and significant decline in US stocks from the early February high. Since then, boosted by factors such as the AI frenzy, a cooler-than-expected US inflation, and the Federal Reserve nearing the end of its rate hikes, US stocks have been on a steady rise without experiencing a correction of more than 5%. Analysis suggests that a sharp increase in VIX is not a good sign for the US stock market. Although the VIX is still relatively low compared to historical levels, this week's unexpected surge may cause some market forces behind the significant rebound in US stocks this year to change direction. In March 2020, during the initial outbreak of the COVID-19 pandemic, the VIX reached an astonishing high of 85. During last year's bear market in US stocks, it also reached levels above 35 for several months. "Nomura Securities' cross-asset strategist, Charlie McElligott, stated in a report to clients this week, 'We have seen the prerequisites that could eventually lead to some selling or deleveraging risks. Investors need to start considering the potential impact of greater market volatility on volatility-sensitive systematic strategies.'" McElligott refers to investors who focus on risk and volatility control strategies, allocating stock market positions based on market trends. They have been one type of buyer contributing to the strong rebound in US stocks in recent months. However, as volatility rises and falls are interconnected, an increase in volatility may force them to reduce their stock exposure, resulting in the opposite effect and pushing the stock market down. Gerry Fowler, Head of European Equity Strategy and Global Derivatives Strategy at UBS Group, stated, "The market's expected volatility is smaller than what we anticipated, and it is far ahead of the signals sent by leading indicators. We do not expect volatility to soar before 2024, but even so, with the deterioration of the macro environment, volatility should be higher than the current market pricing."