Wednesday, October 14, 2009
Another quick update to one of my favorite charts. Implied volatility has fallen to a new low for the year, and stocks are at another new high. The market is gradually losing its fear of the future, but I note that at 22.8, the VIX index is still almost double the level that prevails during times of relative tranquility. And credit spreads, a key measure of confidence, are still at levels that in the past have been consistent with recessionary conditions. So we might say that the market's improvement to date amounts to a recovery from conditions of extreme fear and uncertainty (and a market that was braced for a fearsome depression and global deflation), to a condition of moderate fear and uncertainty (and a market that is braced for a modest recession). There is still plenty of room for further improvement.
Posted by Scott Grannis at 1:02 PM