Wall Street ‘fear gauge’ flashes red as stocks extend selloff

Wall Street’s most watched gauge of investor anxiety jumped to a new eight-month high on Monday as U.S. stocks extended their selloff from last week on worries over the fallout from U.S. President Donald Trump’s tariff policy.

The Cboe Volatility Index - an options-based gauge of investor anxiety - jumped as much as 14.82 points to 60.13, its highest since August 5. The index, dubbed Wall Street’s ‘fear gauge,’ was last up 4.52 points at 49.83, after registering its highest closing level in five years on Friday.

The index rose as Wall Street’s main equity indexes opened sharply lower, with the S&P 500 close to confirming it is in a bear market - a drop of 20% from a record high.

The benchmark index recovered ground to trade up 0.7% in choppy price action after CNBC reported White House officials were not aware of U.S. President Donald Trump considering a 90-day pause in tariffs for all countries except China.

“The tariff episode has definitely rocketed VIX into panic territory,” Jim Carroll, portfolio manager at Ballast Rock Private Wealth, said.

“The big question now is when we recover and how quickly,” he said.

The VIX logged a record jump in August as traders rushed to hedge against market volatility during a global selloff fueled by U.S. recession fears. The index went on to mark a record retreat, however, as investors were quick to return to strategies that bank on low stock volatility.

“Tariff resolution is likely to be protracted, so I don’t think we see the rapid collapse of volatility that happened last August,” Carroll said.

Still, the VIX’s latest jump puts it at levels that in the past have marked a crescendo in selling that could at least result in a pause in the market’s slide.

“Readings of this magnitude are not only historically rare, but they also often overlap near major capitulation points in market sell-offs,” Adam Turnquist, chief technical strategist for LPL Financial, said in a note.

BofA Global Research and Oppenheimer Asset Management on Monday became the latest Wall Street research firms to cut their year-end targets for the S&P 500 index to below the 6,000 mark in response to risks from a deepening global trade war.

Oppenheimer reduced its target for the benchmark index to 5,950 from 7,100 target, while BofA reduced to 5,600 from 6,666, making it one of the lowest on Wall Street.

The S&P 500 index slumped further on Monday and was down more than 20% from its all-time high, putting the benchmark index on track to confirm a bear market. [.N]

Global stock markets have seen a bruising sell-off as investors bolt to safe-haven assets on fears that President Donald Trump’s tariffs could trigger a recession in the world’s biggest economy.

“At current levels, the equity market appears oversold in our view with uncertainty at levels investors find hard to embrace,” said John Stoltzfus, chief investment strategist at Oppenheimer.

The index closed at 5,074.08 on Friday.

Stoltzfus also reduced the earnings-per-share (EPS) estimate of the index by 3.6% to $265.

Oppenheimer, which maintained its “overweight” stance on U.S. equities, said its reductions of the index target and earnings projection “do not imply a capitulation in our bullish outlook towards equities but rather a need to set expectations reasonably as to how fast and to what levels stock prices are likely to recover based on the degree of uncertainty”.

As a rout in global equity markets deepened on Monday amid tariff turmoil, the signs of stress across financial markets have started to flash brightly.

“It’s quite clear that the market is in a panic,” said Van Luu, global head of FX and fixed income strategy, Russell Investments.

The asset manager’s gauge of investor risk aversion, which incorporates pricing trends and sentiment indicators, was approaching levels last seen in September-October 2022, when global central banks started an unprecedented run of interest rate hikes.

Here’s a look at just some of the indicators on investors’ watchlist.