The stock market’s calm is over as Wall Street’s ‘fear gauge’ revs up

by Mark DeCambre


So much for the those calm markets. Wall Street’s “fear gauge” is rearing higher as U.S. equities logged a second sharp selloff in the past three sessions as hand-wringing over the Federal Reserve’s monetary policy contributes to a return of volatility.

The CBOE Volatility Index VIX, +17.74% often used as a measure of fear in the market, is up more than 20% on Tuesday, implying that investors are increasing bets that stocks could suffer further near-term swings lower.  The VIX has hovered around 12 since mid-July. That level usually signals quiescence, while a reading of 20 or above indicates that investors are bracing for moves sharply lower.

Some make the case that the market has been spoiled by the episode of protracted quiet, while others view the surge in the VIX as necessary for stocks to move higher:

“I think this volatility is necessary. When the market gets too complacent, you need to have a little scare to get it to recycle,” said Asbury Research’s chief market strategist, John Kosar.

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