Fear and Greed Index

Sovereign Wealth Partners

This is an interesting live index on US investor fear or greed and what emotion is driving the market now.

Have a look at http://money.cnn.com/data/fear-and-greed/

The index comprises 7 fear and greed indicators analysing movement across each indicator over the last 12 months (US market focus). Generally, the lower the number the more attractive the US stockmarket is and the higher number, potentially a time to be more cautious.

Current Indicator Readings

Market momentum – Greed. As the S&P500 is 4.5% above its 125-day average and is further above the average than has been typical during the last two years.

Junk Bond Demand – Neutral. Investors are accepting spreads historically higher, however in line with recent price history, of low quality junk bonds over safer investment grade corporate bonds. Investors are not showing significant fear or greed.

Stock Price Strength – Neutral.  The number of stocks hitting 52-week highs exceeds the number hitting lows but is in the middle of its two-year range and is neutral.

Market Volatility – suggests Fear. The Volatility index is 7.6% above its 50 day moving average indicating investors are concerned about near-term values of their portfolios

Put and Call Options – Extreme Fear. Having moved from Fear only days ago, the volume of put options has lagged that of call options by 32%. This is still, however, the highest level of put buying seen during the last two years.

Safe Haven Demand – indicates Extreme Fear.  Bonds have outperformed stocks by 1.02 percentage points during the last 20 trading days. This is close to the weakest performance for stocks relative to bonds in the past two years and indicates investors are fleeing risky stocks for the safety of bonds.

 

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