The stock market has seen a dramatic shift in investor sentiment recently. Fear and volatility have collapsed as bulls flood back into the market. The S&P 500 notched significant gains on Wednesday, and the usual barometers of investor jitters have suddenly flatlined.
The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, has cratered. It closed below 19 every trading day this week. DataTrek Research says this range is “solidly back in bull market territory.”
The collapse of the VIX has been dramatic.
From April 10 to May 12, the VIX posted its sharpest decline on record, according to Bespoke Investment Group.
Greed drives stock market surge
Just after President Trump’s Liberation Day speech, the VIX had closed above 52.
Meanwhile, CNN’s Fear and Greed Index has jumped from an “Extreme Fear” reading of 3 in early April to a 70, well into “Greed” levels. Investors today are more confident than they’ve been in eight months. With animal spirits steering markets, momentum is arguably running a little hot.
Bespoke Investment strategists noted that major US index ETFs have all moved in lock-step up into overbought territory, with the exception of the Dow 30. The Nasdaq 100 has extended into “extreme overbought” levels, trading more than two standard deviations above its 50-day moving average. Much of the newfound confidence stems from Trump’s tariff pause with China, though a string of cooler-than-expected inflation reports have also helped.
But with greed rising as fast as fear did in April, the risk now may be that markets are once again overshooting on sentiment.
