Volatility returned to markets in early February, sparked by strong US wage growth data. After months of calm, the S&P 500 equity index fell by 4% on 5 February and the VIX – a measure of US equity volatility that is sometimes referred to as Wall Street’s “fear gauge” – experienced its largest one-day move in its 28-year history. Interestingly, measures of volatility in other markets, including interest rates and currencies, moved by much less. So what caused the outsized spike in the VIX? Some of the rise was linked to rebalancing flows associated with VIX exchange-traded products (ETPs), which can amplify moves in the volatility market. The events have also led to some questions whether developments in VIX ETPs can also affect the S&P 500 itself –whether the ‘tail’ can wag the ‘dog’.