That’s the CBOE Vix – a favourite Wall Street gauge of investor anxiety.
As you can see it’s at the lowest level since May 2008, when a lull after the Bear Stearns rescue gave way to an implosion.
Which, as the FT’s John Authers noted in Tuesday’s Short View, is somewhat disconcerting.
Markets move on the interaction of news with flows of greed and fear among investors. When fear is lowest, the danger of a fall is greatest.
Especially when other sentiment indicators are considered:
Another great contrarian indicator is the survey of sentiment by the American Association of Individual Investors. Last week, this showed the lowest proportion of self-described “bears” since February 2007 – when volatility first started to spike as investors at last began to grasp the severity of the subprime mortgage crisis in the US.
Bearishness in this survey hit an all-time high in March last year when the current rally first started, showing how much money can be made by betting against extremes of sentiment.
But it’s not just the retail punter who’s bullish.
The Pros are too.
From Bloomberg:
Investors forecast gains in each of the nine countries represented in the Bloomberg Professional Confidence Survey for the first time since the data began in 2007. The sentiment measure for the Standard & Poor’s 500 Index climbed 35 percent to 54.37. That’s only the second time the reading exceeded 50, signaling participants anticipate a rally in the next six months. The responses from 4,101 Bloomberg users were gathered Jan. 4-8 as the MSCI World Index added 2.6 percent.
The Bloomberg sentiment indexes for the U.S., Japan and Spain rose above 50 and reached all-time highs. The U.K. gauge topped 50 for the first time since October, while Switzerland climbed to a record. Spain exceeded 50 for the first time, adding 17 percent to 51.41. Confidence in Switzerland climbed 3.6 percent to 60.89, and the U.K. index surged 22 percent to 55.61. The measures for Italy, France and Germany increased 14 percent, 3.7 percent and 2.4 percent to 62.61, 57.77 and 53.33, respectively.
Does anyone detect a hint of complacency?
Related link:
Surely he can’t still be bearish? – FT Alphaville