Should we worry as the market’s ‘fear gauge’ nears its highest level since the Great Recession?
Summary
The S&P 500 regained some lost ground Monday, but when the VIX peaked Friday the market was 12.8 percent below the all-time high it hit on Feb. 19, less than two weeks earlier. Back then, investors expected steady sailing — the VIX indicated markets would move a modest 4.2 percent in the next 30 days. Investors were spooked by the rapid global spread of the novel coronavirus — and governments’ willingness to pursue aggressive containment strategies that could hamstring economic activity. By looking at how traders value the opportunity to buy or sell the S&P 500 at a given level 30 days down the road, analysts are able to determine how far the index is expected to swing over that time. One note of caution: Investors shouldn’t fear short-term volatility for its own sake — especially if they’re the patient, buy-and-hold types who tend to prosper in the long run.