Wall Streets fear index jumps the most in 4 months as Trump spooks market
A popular measure of Wall Street fear jumped to its highest level in more than four months on Monday, as the equity market retreated amid concern over President Donald Trump’s controversial executive order aimed at tightening U.S. immigration rules.
The CBOE Volatility Index VIX, +13.89% which measures Wall Street expectations for large swings in the S&P 500 SPX, -0.64% climbed the most, up about 16%, to 12.22, marking the sharpest jump for the gauge of market anxiety since Sept. 26, according to FactSet data.
The surge in the VIX takes it over 12, which is still relatively low for the metric, with levels of 20 typically considered the clearest sign that fear has gripped the market, while a reading of 12 signals relative complacency. However, the gauge has hovered around historically low levels since Trump’s election victory Nov. 8 sparked a jump in euphoria and appetite for assets perceived as risky, like stocks. Trump has fostered expectations that his administration will be business friendly and therefore good for stocks. But Trump’s recent executive orders on trade and immigration are causing investors to reassess the benefits of his more protectionist agenda, including building a wall along the U.S.-Mexico border and retooling trade agreements to put “America first.”
The most worrying aspect of the climb for VIX is that it had been trading as low as 10.58 as of Friday’s close, around 2014’s lows and perilously close to a 10-year nadir. Some view the VIX as a contrarian indicator. In other words, the lower it goes, the greater the likelihood of a sudden, jarring pullback that can catch investors off guard, some market technicians say.
http://www.marketwatch.com/story/wall-streets-fear-index-jumps-the-most-in-3-months-as-trump-spooks-market-2017-01-30
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