Stocks may be returning to record levels, with the S&P 500 crossing above its 2007 closing high, but the VIX is signaling that they are doing so in a much different environment.
As stocks climbed to records in the fall of 2007, the market�s so-called fear gauge had already been showing signs of worry for months.
On July 26, 2007, the VIX moved above 20 for only the fifth time in the previous 3.5 years as junk bonds were selling off. On July 10, Standard & Poor�s had said it was reviewing $12 billion worth of subprime mortgage-debt for possible downgrades. On Aug. 15, the VIX broke 30 for the first time in 4.5 years amid additional worry as lender Countrywide Financial faced more foreclosures and delinquencies.
The shift higher in the VIX came after the fear gauge averaged just 12.81 in 2006. In 2007, that average climbed to 17.54, before soaring to 32.66 in 2008.
But now, the VIX is moving in the opposite direction. In 2012, it averaged 17.80. So far this year, that number is just 13.54,�suggesting investors are worry free this time around.
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