One Wall Street measure of market fragility just hit its highest possible level. The last time it did, volatility spiked.

By Nora Redmond

UBS's "Turbu-lens" index has hit a reading of 1 for the first time since late 2024.

UBS's market fragility indicator has hit its top level for the first time in two years ahead of the Federal Reserve's next meeting and midterm elections.

The Swiss investment bank's "Turbu-lens," an index which is designed to forecast market fragility, was at a reading of 1 on Aug. 19, the maximum rate it's reached since late 2024.

The index is measured using inputs including a basket of about 100 high-yield corporate credit default swaps, G10 foreign exchange volatility and S&P 500 commodity trading-advisor positioning.

"The market has become notably more fragile," strategists at UBS, led by Maxwell Grinacoff, head of U.S. equity derivatives research, wrote in a recent note.

The last time the indicator reached the rate of 1 was heading toward the Fed's first meeting in December following the U.S. presidential election of 2024.

The CBOE one-month volatility index VIX climbed 12 points before jumping by about 25 points in March 2025.

They added that the upcoming Federal Open Market Committee meeting in September and midterm elections in November are two risks that have risen in relation to risk pricing, with the options market projecting the S&P 500 SPX to rise or fall by almost 1% on both days.

"Investors may also consider selling VIX Sep puts to fund call spreads for flat premium," the strategists said, recommending selling a VIX Sep 16 put and buying a 20/25 call spread. A bull call spread involves purchasing a lower-strike VIX call and selling a higher-strike one with the aim of profiting if the index rises.

"Lastly, investors who believe midterm election risk pricing might continue to rise or remain elevated may consider selling VIX Oct puts (which capture midterm elections on 03-November) to fund VIX Nov puts to position for volatility compression post the event," they said. Here, November 19 puts are bought against selling October 19 puts.

However, while UBS's index is flagging extreme market vulnerability, the strategists warn that the catalyst is not certain and that they first need to determine what it will or will not be.

-Nora Redmond

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08-25-26 0549ET