Volatility is rising again, just time for the first rate hike in almost a decade. Last week we saw the 5th largest weekly advance in the history the Volatility (“VIX”) Index.

The increase volatility of volatility over the past two years has been unprecedented (click here for our research on leading indicators of volatility).

Today, the VIX Index crossed above 25. Going back to 1990, the Federal Reserve has never hiked rates with volatility that high heading into the meeting. The highest VIX level heading into a hike was 23.96, occurring in May of 2000. After that meeting, a recession would follow in 2001 and the Fed would not hike again for another four years.

Data or Stock Market/Volatility Dependent?

The Federal Reserve has had an unhealthy relationship with the financial markets for a number of years now. Every time they seem close to hiking rates, the market sells off and they take a more dovish stance. It has become abundantly clear that they follow the stock market far more than economic data.

With the spike in volatility over the past week, the Fed will once again be tested when they meet this Wednesday. Will they prove their “data dependency” and finally hike or once again succumb to the short-term will of the stock market?