Sentiment Sours
FINANCIAL MARKETS had a lot to digest in recent days: Retail analysts are keeping a close eye on holiday spending, economists got their latest dose of employment data���and traders are coming to grips with the current bout of volatility.
The VIX, the S&P 500 Volatility Index or ���fear gauge,��� surged above 30 on Friday. That was the highest end-of-week close since January. For perspective, the VIX climbed to 80 during 2020's COVID-19 stock market crash. It was as low as 15 during periods of relative calm earlier this year.
What���s driving the uncertainty? It���s hard to pin it on one narrative. The Omicron variant wasn���t the sole culprit. After all, both travel and stay-at-home stocks were hit hard last week. Instead, it might just be stock market investors taking a little money off the table.
Market analysts at Bespoke Investments point out that the average stock in the S&P 1500 is now 19.1% below its 52-week high. There���s been a stealth correction taking place beneath the market���s surface since February���all while the broad market kept within a few percentage points of its all-time high.
Small-caps, value stocks and foreign shares have all endured notable drawdowns��this year after impressive rallies off the March 2020 lows. Since March 2021, however, those niches of the stock market have turned very choppy.
The last few weeks shouldn���t come as a surprise to long-term investors. Dips happen. Quite often they occur when folks are overly optimistic about the near-term direction of the stock market. Back on Nov. 10, 48% of those surveyed for the weekly AAII (American Association of Individual Investors) Sentiment Survey were bullish, well above the long-term average. Stocks then dropped, and suddenly less than 27% are bullish, according to last Thursday���s survey. Maybe investor sentiment is finally catching up with the rough 2021 suffered by many stocks.
The VIX, the S&P 500 Volatility Index or ���fear gauge,��� surged above 30 on Friday. That was the highest end-of-week close since January. For perspective, the VIX climbed to 80 during 2020's COVID-19 stock market crash. It was as low as 15 during periods of relative calm earlier this year.
What���s driving the uncertainty? It���s hard to pin it on one narrative. The Omicron variant wasn���t the sole culprit. After all, both travel and stay-at-home stocks were hit hard last week. Instead, it might just be stock market investors taking a little money off the table.
Market analysts at Bespoke Investments point out that the average stock in the S&P 1500 is now 19.1% below its 52-week high. There���s been a stealth correction taking place beneath the market���s surface since February���all while the broad market kept within a few percentage points of its all-time high.
Small-caps, value stocks and foreign shares have all endured notable drawdowns��this year after impressive rallies off the March 2020 lows. Since March 2021, however, those niches of the stock market have turned very choppy.
The last few weeks shouldn���t come as a surprise to long-term investors. Dips happen. Quite often they occur when folks are overly optimistic about the near-term direction of the stock market. Back on Nov. 10, 48% of those surveyed for the weekly AAII (American Association of Individual Investors) Sentiment Survey were bullish, well above the long-term average. Stocks then dropped, and suddenly less than 27% are bullish, according to last Thursday���s survey. Maybe investor sentiment is finally catching up with the rough 2021 suffered by many stocks.
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