Summary
After a mostly calm first six weeks of the year — when the major benchmark indices were up almost 5% and the VIX Volatility Index dipped below 15 — the closely-watched “fear index” recently soared beyond 27 and the S&P 500 has plummeted 8%. Are investors headed for a market correction or even a visit from the bear? Not necessarily. But just because equities appeared to be solidly in a bull market, that doesn’t mean there aren’t risks to investing. Indeed, in our 2025 Market Outlook, we noted that investor complacency was high, the tariffs and trade wars could slow the economy, and that stock valuations were susceptible in the event of a sell-off in the Information Technology sector. That was our bearish case. Our base case called for another year of growth in the U.S. economy (and no recession), declining interest rates, and double-digit EPS growth. Each of the planks in the platform is currently in place. So assuming that the Trump Administration gets its economic growth plans on track, there’s reason to expect equity prices can recover. Back to the market, the current fear index reading is around 25, which is well above the 10-year average of 20 and nearly one standard deviation (sigma = 7.5) above normal. This reading compares to the average VIX of 24 during the most-recen
