Investors' Fears Are Increasing To Yearly Highs

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Wall Street’s measure of investor’s fear in trading is at a high, signaling further declines for the S&P 500.

The “fear gauge” is officially named the CBOE Volatility Index (VIX), and was approaching a score of 36 last Friday, according to Business Insider. That score is up 11% and is higher than its average score of 19. When the VIX score increases it has usually been followed by further drops in the S&P 500 along with drops in share values across the stock market.

More specifically, when the VIX is between 25 and 45, the S&P 500 was found to fall by 79% cumulatively. When trades have occurred with VIX scores between 30 & 35 the S&P 500 dropped by 1.1% on a monthly basis.

This year the VIX score has reached a low near 25 before the pandemic brought the economy to a halt. However, that is not the lowest score that has been recorded. In 1990, the VIX score reached a low of 12 and in 2002 it sunk to 13, signaling high investor confidence.

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Economics, Finance and Investing

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