Stock market WARNING as Wall Street’s ‘fear index’ plunges to lowest level in decades
WALL Street’s so-called ‘fear index’ has dropped to its lowest level in more than 20 years which could be a sign that stock market bubbles are about to burst, experts have warned.
By LANA CLEMENTS
Express.co.uk
Sun, May 14, 2017
The VIX index measures market volatility and falls when there is calm and rises in line with turmoil.
In recent days, the index fell below 10, to hit the lowest level since 1993 when the index moved to 9.17.
By comparison, the fear gauge hit 80 during the financial crisis in 2008.
Investors use the index to judge the outlook for trading.
But in the past, the index has fallen to some of its lowest levels right before signifiant crashes.
For example, the index fell below 10 in 2006, just before disaster struck markets across the world.
Experts warned investors could be lulled into a false sense of security by the current low levels of the fear index.
It comes as the US stock indices the Nasdaq 100 and S&P 500, hit record highs along with Britain’s FTSE 100.
Michael Baxter, economics commentator for The Share Centre said: “The index, which is taken from a moving average of the S&P 500, is often referred to as the fear index – implying that right now the markets are very unafraid.
“Are they however, too complacent?
“It is often said that markets turn at the moment when all but the most contrarian of investors are on the verge of giving up – a bull market turns sour just at the moment when most bears have been converted to holding more optimistic views.
“Recall, that while the index fell below 10 in 2006, less than two years later the global economy suffered its worst financial crisis in 80 years.
“Just because the VIX is low, it does not mean that all is well, but then neither does it automatically mean crisis is around the corner.”
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