Wall Street’s so-called fear gauge has been subdued this year, in a “mysterious shrinking” pattern, that’s a bullish signal for equities, according to DataTrek Research.
The gauge, known by its ticker VIX, has dropped more than 35% so far this year and is trading below its long-term average, according to FactSet data, at last check. Its trading levels are derived from options contracts tied to the S&P 500, the U.S. stock benchmark that has rallied 15.9% in 2023 as of Monday afternoon.
“At first glance, this makes little sense,” he said. “The VIX is supposed to be Wall Street’s ‘Fear Index’ and it would appear “there’s plenty to be fearful of just now.” There also has been the recent climb in Treasury rates that has weighed on stocks lately, with 10-year Treasury yields looking “set on making new decade-plus highs,” said Colas.
See: Wall Street’s ‘fear gauge’ VIX shaping up more like 2021 than 2022, as U.S. stocks rally this year, says DataTrek The Dow Jones Industrial Average DJIA, S&P 500 SPX and Nasdaq Composite COMP were trading mixed on Monday afternoon, as investors digested fresh data showing a drop in confidence among homebuilders this month amid elevated mortgage rates.