Despite All This Year’s Stock Market Woes, Wall St’s “Fear Index” is Holding

All it can take is a number of limited moments of studying headlines for cortisol to get started pumping as a result of your veins. But you may possibly be shocked to know that, irrespective of war, surging inflation, fascination prices, and electrical power selling prices, dread is actually in reasonably limited provide.

The CBOE Volatility Index (VIX) — the famed “anxiety gauge” that tracks investor sentiment on Wall Road — has remained down below the stage of bear markets of yore.

Ir/rational Fear Index

In spite of the S&P 500 remaining down 18% this 12 months — wiping roughly $12 trillion from investors’ portfolios — the index has not touched 40 this 12 months, the variety most analysts believe signifies pessimism for the market’s quick long run. Past week, the VIX hovered in the large 20s, and closed at 27 on Friday. By comparison, for the duration of the 2008 financial crisis and at the bleak outset of the pandemic in 2020, the index climbed earlier mentioned 80.

So with all the undesirable information now, why the relative tranquility compared to these bear markets? Imagine it or not, the reply is balance:

• Somewhat than the unexpected, shock-pushed crashes that took place immediately after Lehman Brothers collapsed or Covid-19 effectively shut the globe down in 2020, the S&P 500 has been on a steady and fairly orderly cruise south this 12 months. When the market place slipping constantly is rarely pleasant, it hasn’t triggered outright panic.
• In reality, traders are betting the VIX will close 2022 below 30, due to the fact known will cause — primarily inflation and desire level hikes — underlie the incremental decrease and are anticipated to ultimately easy out (even if it usually takes months). “The current habits is enjoying out related to the 2000-2002 dot-com bear market place, with no big unexpected shocks but sustained higher understood volatility,” Talal Dehbi, a strategist at PrismFP, explained to Bloomberg.

Quiet Til December: Though PrismFP calculates the VIX will conclude the yr at just under 30 — down only somewhat from these days — it ought to be noted the VIX is previously mentioned its 5-12 months average of 20. Marketplaces are down right after all, but they’re nevertheless way a lot less fearful than in earlier downturns. It’s possible this bear is just additional cuddly than the final just one.