The fear and index plummeted to 29 on Friday, which was its lowest level since March 2023. A glance at the timeline of the index reveals it took a plunge right after the FOMC meeting on 20th September. The chair of the Federal Reserve hinted towards a possible rate hike before the end of 2023.
As a result of this hawkish stance, a sell-off was triggered in the US equities. The Nasdaq 100 lost 722 points as bearish sentiment surrounded the tech stocks. The S&P500 followed by sliding 4.7% towards its lowest level since June 2023.
What Is The Fear And Greed Index?
The fear and greed index is mostly used by investors to judge the market sentiment in the stock market. This index is comprised of 7 different indicators and provides a score from 0 to 100. A score of 0-45 indicates fear, a score of 45-55 indicates neutrality, and a score of 55-100 indicates greed in the market.
The ten-year treasury bond yield soared to 4.65% this week, which was its new 16-year high. This made bonds more lucrative than stocks for investors. Ultimately, This led to a loss in demand for US equities as the indices plunged to their new 3-month lows.
Fear Prevails After FOMC Meeting
As the stock market faces headwinds, 5 out of the 7 indicators of the CNN fear & greed index indicate fear. The Stock Price Strength indicator currently sits near its April low. The put and call ratio also soared to its new 6 monthly highs, which indicates increased nervousness in the investors.
The fear and greed index also shows that investors are currently preferring bonds over stocks, as shown by the 20-day stock and bond returns indicator. However, despite fear looming over the stock markets, the market volatility indicator shows neutrality. Side by side, the spread between junk bonds vs. investment grade also declined, which suggests investors are taking on more risk.
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