Economic data released in March reflected a strengthening macroeconomic backdrop, steady inflation, and a shifting labor market. However, arising global conflict disrupted the outlook for inflation and U.S. monetary policy, driving the pullback in the S&P® 500 Index during the quarter. From the beginning of 2026 through January 27, the S&P 500® Index advanced 2.02% before declining 8.89% from January 27 to March 30. The S&P 500® Index bounced 2.92% on the last day of the quarter.
Implied volatility, as measured by the VIX®, averaged 20.43 in the first quarter. Consistent with its typical relationship, average implied volatility exceeded realized volatility, as measured by the standard deviation of daily returns for the S&P 500® Index, which was 14.44% for the quarter. The VIX® ended the fourth quarter at 14.95 and quickly hit an intra-quarter low of 14.49 on January 9. The VIX® climbed to an intra-quarter high of 31.05 on March 27 before ending the quarter at 25.25. The quarterly spread between S&P 500® Index implied and realized volatility, or the Volatility Risk Premium (VRP), was 6.01% – well above the since-1990 average of 3.59%.
The Cboe® S&P 500 BuyWriteSM Index1 (the BXMSM) returned -0.92% in the first quarter. The premiums the BXMSM collected as a percentage of its underlying value provided loss mitigation and are an important component of performance. The premiums the BXMSM collected as a percentage of the BXMSM‘s underlying value were 1.75%, 1.66%, and 2.57% in January, February, and March, respectively. The rules-based timing of the BXMSM‘s replacement of its single written index call option contract resulted in the BXMSM having varied levels of market exposure.
The Bloomberg® U.S. Aggregate Bond Index returned -0.05% in the first quarter. The yield on the 10-year U.S. Treasury Note (the 10-year) ended December at 4.17% and hit an intra-quarter low of 3.94% on February 27 before climbing to an intra-quarter high of 4.43% on March 27. The 10-year ended the quarter at 4.32%.
[1] The BXMSM is a passive total return index designed to track the performance of a hypothetical buy-write strategy on the S&P 500® Index. The construction methodology of the index includes buying an equity portfolio replicating the holdings of the S&P 500® Index and selling a single one-month S&P 500® Index call option with a strike price approximately at-the-money each month on the third Friday of the standard index-option expiration cycle and holding that position until the next expiration.
Past performance does not guarantee future results. Sources: Morningstar DirectSM and Bloomberg, L.P.
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