Thursday, January 7, 2010
Yet another update in a long-running series. The VIX index is a good proxy for the level of uncertainty, fear and doubt in the market. As FUD declines, prices should rise, and that has been the story ever since last March. This is a variation on the larger theme of confidence; confidence in the banking system almost collapsed just over a year ago, and it has been gradually rebuilding ever since. With greater confidence, money that was essentially stuffed under mattresses is getting spent, and the wheels of commerce are spinning back up as a result. It's only natural that equity prices should move up as confidence returns. This process has a ways to go, in any event, since a "normal" level of the VIX would be in the range of 10-15.
Posted by Scott Grannis at 10:33 AM