Aside from the mess in fixed income markets, it may not always be obvious, but the 2022 rout has been remarkably subdued in terms of both realized and implied volatility. In other words, rather than a punctured balloon let loose to fly, equity markets have steadily deflated.

The Vix volatility index has not broken through the 40-point barrier this year and has generally oscillated between 25 and 35 points. Despite the S&P 500 losing more than a fifth of its value this year, that is not far above its long run average of about 20 points. Real-world volatility is even lower.

After Russia invaded Ukraine in March, the European Vstoxx vol index briefly surpassed the 50-point mark. However, it is now lower than Vix, measuring 28.8 points per pixel. Both volatility indices are significantly higher than in the pre-Covid days but remain low in light of the financial environment.

So, what's the deal with vol? In his Q3 letter to investors, Benn Eifert, chief investment officer at volatility-focused hedge fund QVR Advisors, provides a good explanation. His emphasis in the following block quote has also been remarkably orderly. Why has the stock market been so stable?

“In late 2021 and early 2022, institutional investors formed an unusual near-consensus view that central banks would raise interest rates and equities would fall. Hedge funds cut net and gross exposure dramatically. Asset owners moved to underweight positions in equities. Both initiated large hedges, leading to sharp moves higher in implied volatility and skew in late 2021. This widespread consensus turned out to be correct, and an extended trend lower ensued. Markets crash when fast money investors are caught long and leveraged, panic sell together, and trigger forced liquidations and unwinds of other leveraged positions.”

Source: https://money.com/stocks-rallying-bear-market-ending/