Wes Moss Gives His Perspective On The Market on Morningstar.com

Trouble in a Quiet Market?

Investors seem not so much complacent as confounded.

Some indicators point to a complacent market lately. Boon or warning? How scared or comfortable are investors now and, for that matter, how reliable are our indicators?

The Chicago Board Options Exchange Market Volatility Index (VIX) measures implied volatility in the stock market for the coming 30 days. Aka the fear gauge, the VIX also represents how investors perceive current markets’ risk and it currently sits at 11.8.On July 1 and on other recent days, the VIX fell to under 11, a low unmatched since February 2007 and close to its lowest level in its two decades of existence. (VIX values greater than 30 are generally associated with a large amount of volatility as a result of investor fear or uncertainty, while values below 20 generally correspond to less stressful, even complacent, times in the markets.)We all remember 2007, when the housing bubble burst and the stock market plummeted – and when the VIX reached 85 during the peak of the crisis. One nervous camp says that this low VIX clearly signals investor complacency with the stock market, harbinger for a world of trouble.

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