Analysis: Wall Street ‘fear gauge’ offers no silver lining as bear market looms

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A surprising lack of panic in the U.S. stock market as measured by Wall Street’s 'fear gauge' is keeping some investors from calling a bottom on an already bruising equity selloff.

Traders work on the floor of the New York Stock Exchange in New York City, U.S. May 4, 2022. REUTERS/Brendan McDermid/FilesNEW YORK, May 13 - A surprising lack of panic in the U.S. stock market as measured by Wall Street’s "fear gauge" is keeping some investors from calling a bottom on an already bruising equity selloff.has hit an average level of 37 at market bottoms, compared with its most recent level of around 32.

Many investors believe volatility is likely to remain elevated as markets digest a hawkish Federal Reserve, soaring inflation and geopolitical uncertainty stemming from the war in Ukraine. The VIX had logged a high close of 82.69 during the March 2020 COVID-19 driven selloff, after which the S&P 500 more than doubled as the Fed slashed rates and implemented other easy money policies to support the economy. The index hit 36.07 in 2018, when stocks stopped a hair short of entering a bear market on worries over tighter Fed policy, and topped out at 80.86 during the Great Recession.

Investors' aggregate equity positioning has slipped to the levels lowest since the 2020 COVID-19 selloff, analysts at Deutsche Bank estimate. That measure of choppiness stands at 29, its highest since July 2020 and about 4 points above where it stood on the day the S&P 500 bottomed during the last 54 instances of corrections and bear markets going back to 1928, a Reuters analysis showed.

 

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