How the stock market gauges fear in a time of Trump

by Mark DeCambre

Fear. It is one of the prevailing themes Wall Street is focusing on as they survey a U.S. stock market that has staged a steady, albeit measured, assault on all-time highs over the past few months and as President Donald Trump settles deep into his chair in the Oval Office.

Nicholas Colas, chief market strategist at Convergex, told MarketWatch that hand-wringing about risk in the stock market amid growing political concerns is among the topics most frequently cropping up in discussions with clients, even as the Dow Jones Industrial Average DJIA, +0.22% S&P 500 index SPX, +0.02%  and the Nasdaq Composite Index COMP, +0.17%  hit records. “The effect President Trump is having on capital markets is the first thing clients want to talk about. For many, it is the only thing,” Colas told MarketWatch.

So, why is the CBOE Volatility Index VIX, -0.26% or VIX, otherwise known as Wall Street’s fear gauge, hovering around historic lows, highlighted by a fleeting lurch down to a 10-year nadir of 9.97 on Feb. 1.

Watch the VIX

For investors watching the VIX, market technician John Kosar at Asbury Research tells MarketWatch that he’s looking for a sustained level of the gauge above 12.20 as a sign that fear is genuinely creeping higher. That is far from the traditional view of 20, which has usually implied fear is gripping the market, but at this juncture that’s enough to catch Kosar’s attention.

“There are potholes all over the road,” Kosar said, referring to the market risks. But he said the market needs to go from “complacent to sustained fear.”

“You need to watch your p’s and q’s. The market is a little too fearless right now. When market metrics indicate that investors collectively are not worried that is precisely when smart investors should be cautious,” he said.

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