As Bad as 2008? The Market’s Fear Index Is Starting to Think So
The spike in the VIX is a reason to be worried. The question is just how much.
Which way is it headed?
Photographer: Dan Kitwood/Getty Images EuropeHow afraid should be you amid the coronavirus outbreak, at least as far as the stock market goes?
One of the best ways to gauge how much fear is in the market is the CBOE Volatility Index, better known as the VIX. The VIX, sometimes referred to as the fear index, is derived from the price of S&P 500 index options; it provides a more or less objective measure of real-time sentiment and market stress -- and it as it highest since the 2008-09 financial crisis:
Here are some thoughts that might put this into perspective:
No. 1. The VIX might serve as a leading buy indicator: The VIX chart cited above give us a sense of exactly how much fear is occurring in the market right now. Some of this is a function of what we don't know; some is simply a recognition that corporate revenues and profits are going to be pressured, perhaps a lot. The big question is for how long.