The psychology of investors plays a key role when trading, regardless of the class asset they are investing in. This is why CNN’s fear and greed index has played a key role in gauging the emotional status of investors at any particular time. Below is a look at the current Fear and Greed index.
Fear and Greed Index Analysis
The current reading of the CNN’s Fear and Greed Index is an extreme fear index of 22. This index reading is a combination of seven factors, including Junk Bond demand, put and call options, Stock price strength, market volatility, stock price breadth, safe-haven demand and market momentum.
The current fear reading is not surprising. This is because, for the past few weeks, news of Russia’s invasion of Ukraine has continued to dominate our newsfeed. This has likely had an impact on the psyche of investors. Reports of sanctions and possible oil and gas shortages across the western hemisphere may also be the reason why investors have gotten cautious investing regardless of asset classes.
Fear and Greed 7 Factors Reading
As previously stated, the Fear and Greed Index is comprised of seven factors. According to the CNN Fear and Greed index, investors were neutral in the junk bond demand category. In the put and call options, investors displayed a lot of greed and in the stock price strength, the Index rated the investors as having extreme fear.
The index also showed that in the market volatility category, investors indicated concern about the decline in the stock market. The stock price breadth also fears, and the last two categories were also of investors expressing fear regardless of the asset class they were trading.
The index reading of the seven categories is an indication of where people are currently rating the market. During periods where there is a lot of investment fear, investors tend not to invest in risky projects and companies. However, a greedy investment environment means investors are always eager to invest regardless of the risk.