Jiemian Finance App learned that despite the benchmark index of the US stock market - the S&P 500 Index, soaring to historic new highs after the US presidential election, multiple signs indicate that the demand for risk hedging against a potential stock market crash is continuously rising. With the S&P 500 Index continuously hitting new highs, concerns of a significant pullback among investors are becoming more pronounced.

Earlier this month, Donald Trump announced his victory in the presidential election, and concerns among voters about the potential disputes in this election completely dissipated. This helped the S&P 500 Index continue to climb to historic new highs. Investors are betting that Trump's leadership in promoting economic growth and the MAGA policy framework will attract more funds to flow into US stocks, driving US stocks to outperform the vast majority of global assets. Evercore ISI, a Wall Street investment institution, stated that President-elect Trump will quickly implement proactive policies to promote economic growth, causing the stock market to rise rapidly. The prospect of relaxed regulations also supports the upward trend of the US stock market. The institution predicts that by mid-2025, the S&P 500 Index will rise to 6600 points.

On Tuesday, the Chicago Options Exchange Market Volatility Index (also known as the VIX Panic Index) closed near its post-election low at 14.10, being to some extent a catalyst for the continuous record highs in the US stock market.

However, some quantitative indicators used to measure the market's acceptance of extreme volatility protection measures - such as the Nations TailDex Index and Cboe Skew, are steadily rising. Although the rise of these indices does not necessarily mean that investors are anticipating a catastrophic crash event, they at least indicate that investors are becoming more cautious in the face of multiple significant risks, including the arrival of a new global trade cycle next year, as well as the sudden worsening of inflation due to the US possibly increasing tariffs and taking measures like expelling immigrants.

Later on Monday, risks surfaced when Trump promised that once he takes office in January next year, he will immediately impose high tariffs on Canada, Mexico, and China, detailing how he will fulfill the election promises that could spark a new round of trade wars.

Although these statements did not have any negative impact on the US stock market, with some investment institutions even stating that the combination of tariff increases and forthcoming tax cuts favor expectations of earnings per share and valuation uplift for some S&P 500 Index component companies, Trump's fierce rhetoric evokes memories of the financial market volatility caused by trade wars during his first term, providing a reason for portfolio hedging.

Amy Wu Silverman, head of derivative strategy at RBC Capital Markets, stated that investors are guarding against the so-called 'fat tail risk,' which is an options term that refers to the higher likelihood of extreme market volatility expectations.

"Although investors generally remain bullish on the prospects of the US stock market, tail risks have increased," she said. 'This is partly due to the rising geopolitical risk premium, as well as potential policy risks, as Trump is poised to return to the presidency and may implement substantial tariff hikes and other anti-globalization measures.'

The Nations TailDex Index is a statistical index based on options, used to measure the corresponding costs of hedging the significant volatility of the SPDR S&P 500 ETF Trust. The index has risen to 13.64, double the low point of 6.68 after the election. Over the past year, the index has been higher than approximately 70% of the time in the past year.

The Cboe Skew Index (Chicago Board Options Exchange Skew Index) is another quantitative index reflecting the market's view on the possibility of extreme price changes, closing at a two-month high of 167.28 on Monday.

The 'VIX call options' that provide market selling protection also indicate a need for funds to guard against 'tail risks' in the market. According to Susquehanna Financial Group's analytical data, the VIX three-month call skew, which measures the intensity of demand for these contracts, is hovering near the highest levels in over five years, implying that some funds are betting on the VIX index surging, suggesting a significant downward adjustment for the S&P 500 index.

"Overall, there is an 80% to 95% chance that the market will maintain lower volatility, which is why volatility indices – such as the VIX index – are relatively low, but more tail events are being considered by funds." Derivatives strategy co-head Chris Murphy from Susquehanna stated.

Maxwell Grinakov, stock derivatives strategist at UBS Group, stated that Trump's tariff commitments on Monday are the type of risk that investors may encounter again in the coming months. 'This once again gives people a reason to start hedging,' he said. 'Undoubtedly, you're seeing more cases of returning to downside hedging.'

Additionally, some investors are also working to cope with the uncertainty of the extent of future interest rate cuts by the Fed in the coming months, as Fed officials are facing a stronger-than-expected US economy and US inflation data. If they overly loosen monetary policy, it could trigger another rebound in inflation, and the cost of reducing inflation this time will be much higher than in 2022. The Fed will hold its last monetary policy meeting of the year on December 17th and 18th.

The conflict between Russia and Ukraine may intensify, as well as the conflict between Israel and Hamas, which may further exacerbate market volatility.

Grinekov from UBS Group stated that next year may be very similar to 2018, when most countries' stock markets reached new highs at the beginning of the year. However, as trade and tariff issues damaged the economy and performance growth expectations, and various asset volatilities increased, stock markets globally began to decline. "Therefore, in my opinion, it is reasonable for some investors to have a need for hedge protection."