What emotion is driving the market now?

The "Fear and Greed Index" is an indicator used in financial markets to gauge the prevailing emotions and sentiments of investors.

With its position currently at an "Extreme Fear" level, it generally indicates that market sentiment is heavily tilted toward pessimism, caution, and fear among investors.

It may signify or be followed by:

Market Volatility: Extreme fear can be a sign that the market is experiencing heightened volatility, with large price swings and uncertainty. This can make it a challenging environment for traders and investors. The VIX is often referred to as the "fear index", it tends to rise when market participants are worried or fearful about potential market declines. Its present elevated level signifies that investors may be concerned about potential market turbulence, economic downturns as a result of inflation, elevated interest rates, or other factors that could lead to significant price swings like the current geopolitical conflicts.

• Potential for Overselling: Extreme fear can indicate that assets may be oversold, meaning that they are trading at prices well below their intrinsic value. Notable instances of this phenomenon are observable in the sharp decline of the S&P from its peak in July and the pronounced dip in the month-to-date performance since its mid-October peak.

• Indication of Market Stress: A fear-fuelled market can indicate economic or geopolitical concerns that are causing market stress. Notably, during such times, assets like Gold tend to emerge as safe-haven investments. This is prevalent with the consistent upward trajectory of the asset’s price, surpassing the significant threshold of $2,000 per ounce month-to-date