Volatility is supposed to measure uncertainty, not cause it. Is the market long volatility or short? Hard to say, for sure.

Based on the Bloomberg article below, recent flow data show investors added $80B in long VIX ETFs. These investors are positioning for increased stock volatility. Volatility tends to increase when equity prices fall. These investors are positioning for increased stock volatility. Volatility tends to increase when equity prices fall.

Investors Added $80B in Long VIX ETFs

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Investors Added $80B in Long VIX ETFs

On the other hand, our second chart shows futures investors are heavily positioned short volatility. These investors are betting on continued calmness. VIX fell last week to 26%, the lowest VIX level since June 5, as equities rallied.

Weekly Net Speculative VIX Futures Positioning

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Weekly Net Speculative VIX Futures Positioning

There may be a simple explanation. The explanation may lie in what economists call the clientele effect, meaning different groups of investors are positioned differently.

The flow data may reflect that long-only asset managers are long vol/pessimistic, while the positioning data may indicate hedge funds are short vol...either as an optimistic naked/speculative position or as a cross-hedge to their equity exposure.