There is a market index that is meant to show fear – and yesterday it went within a whisker of an all-time low. So, let’s get this straight: there is the threat of nuclear war with North Korea, President Trump has just fired the man who is responsible for investigating him, France has had a near-death experience with fascism, and the markets are as relaxed as holiday makers lying in the sun.
The index is called the VIX – it is a measure of the 30-day moving average of the US S&P 500. Or to put it another way, it is a measure of volatility. But in market speak, volatility is a sign of uncertainty, and that is a sign of fear.
The VIX index fell to an all-time low in December 1993, when it scored just 917. There have been just three other periods when the index fell below 10 – December 1994, at the end of 2006/beginning of 2007, and this week.
But at one point yesterday, the VIX stood at 9.58. To put that in context, the VIX passed 80 in 2008, passed 40 in 2011, passed 25 at the time of the EU referendum, and went just over 22 at the time of the US election.
The markets seem to be saying we are happy – no worries. We have a pretty good idea of what the future might bring.
They thought something similar in 2006, the year when the IMF said that the innovation of mortgage securitisation had greatly reduced the chances of a banking a crisis.
Yesterday, also saw the US president fire the head of the FBI – James Comey – apparently for exaggerating the problems associated with Hillary Clinton’s emails, after Mr Comey erroneously said that the number of emails forwarded by Mrs Clinton’s aide, Huma Abedine, when she was Secretary of State were in their hundreds of thousands when in fact the vast majority of these emails were the result of backup of personal devices.
So, is that it then, Mr Trump is worried that Mrs Clinton was treated unfairly? Others are suspicious – they smell the makings of another Watergate scandal, but the markets don’t care.
They are like Catherine Tate’s Lauren – not bothered.
Then there is the threat of some kind of conflict in North Korea.
As for the global economy, sure it does look quite strong at the moment – maybe it’s at its healthiest since 2008, but as we know, these things can change so rapidly. In the US, the rise in student loan debt is causing many to recall subprime mortgage securitisation, then there is the surge of household debt to GDP across much of the developed world – also approaching alarming levels.
None of this is new. There are always reasons to fret about the global economy.
The point is, though, the markets may well be way too complacent – if the VIX falls a fraction further, they will be telling us that the world is at its most certain since 1990, when the index was founded. Do you believe that?