The VIX closed Monday at 15.21, inside a 21-session range of 14.21 to 17.71, while 4 vessels transited the Strait of Hormuz on October 4 against a pre-crisis baseline of 85 per day, according to IMF PortWatch data. Markets are pricing the last four weeks of price behaviour, not the condition of the waterway. That pattern is recency bias, the tendency to treat the most recent stretch of data as the best guide to what comes next, and the research on it explains why calm can feel safer than the underlying risk warrants.
A decision point arrives on October 28, when the Bank of Canada announces at 9:45 a.m. ET and the U.S. Federal Reserve follows at 2:00 p.m. ET, according to the FinanceCalendar schedule. Markets stood near a coin flip on a Canadian rate hike in mid-September, according to LSEG Data and Analytics figures reported by The Canadian Press, and priced roughly a 66% probability of another Fed hike in October as of September 28, according to Trading Economics.
Recency Bias Is Setting the Price of Fear
The VIX has held between 14.21 and 17.71 across the 21 sessions since September 14, a stretch that included the 10-year U.S. Treasury yield reaching 5.04% on September 15 for the first time since 2007 and the Federal Reserve raising rates on September 16 for the first time in more than three years. The index peaked at 17.71 on the day of the decision and fell 12.82% the next session.
The dashed grey line marks the 15.63 average of the 21 sessions shown, and the index closed at 17.71 on September 16, the day of the Federal Reserve rate increase. The 52-week range for the index is 13.38 to 35.30. Source: Investing.com.
Amos Tversky and Daniel Kahneman described the availability heuristic in 1973: people judge how likely an event is by how easily examples come to mind. A month in which every shock was followed by a retreat in the VIX supplies exactly those examples, and the September 17 drop is the vivid one. The examples that are harder to retrieve sit outside the window. The 52-week range for the index runs from 13.38 to 35.30, and every close in the chart sits in the lowest fifth of that range.
The Rational Roots of an Anchored Calm
The calm is not irrational. August core inflation measures landed close to the 2% target, with CPI-trim at 1.9% and CPI-median at 2.0%, according to Statistics Canada data summarized by InvestingLive, which gave the Bank of Canada room to wait. Each shock in the window was absorbed without a broad dislocation, and a reasonable investor updates on that evidence. The behavioural error is not in noticing it. The error is in letting four weeks of absorbed shocks set the reference point for the next one.
The same data set carries the other half of the picture. Brent futures traded near $105.48 on Monday and WTI near $92.60, the U.S. 10-year yield stood at 5.19%, above the 5.04% level that made headlines on September 15, and Canada lost 68,000 jobs in September, lifting the unemployment rate to 6.5%, according to Statistics Canada. Ontario unemployment sits at 7.0%, the highest among the large provinces.
Myopic Loss Aversion Waits for the Next Gap
Shlomo Benartzi and Richard Thaler introduced the concept of myopic loss aversion in 1995: investors who evaluate outcomes over short windows feel the losses inside those windows more intensely, and demand a higher premium for holding equities as a result. Kahneman and Tversky had established in 1979 that losses weigh more heavily than equivalent gains, measured from a reference point. A four-week window of calm moves that reference point to the quiet end of the range. A move that would register as ordinary against a 52-week backdrop registers as a loss against a four-week one.
October 28 puts two central bank decisions on one calendar day. A sharp gap in the VIX on that day would be measured against 15.21, not against the 35.30 high set within the past 52 weeks. The behavioural question is not whether volatility rises. It is how far the recent window has shifted the point from which a rise feels like a loss.