As BofA's Benjamin Bowler wrote, while market liquidity generally correlated with volatility, in recent years, it was progressively deteriorating despite near record low levels on the VIX. According to BofA calculations, average "illiquidity" for S&P e-mini futures since 2018 has been in its 73rd% since 2008. Historically, the period when markets were less liquid was primarily during the '08 crisis when the VIX was north of 40.

It is also noteworthy that illiquidity rose ahead of the sharp fragility events of Aug-2011, Aug-2015, and Feb-2018, while implied vol remained muted until very near the selloffs, suggesting that VIX no longer reflects prevailing market stress, and confirms what Morgan Stanley said in late 2019, namely that Fed actions now directly seek to lower marketwide volatility.