Posthaste: The stock market’s fear index is scary, says economist — but not for the reason you think

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Photo by TIMOTHY A. CLARY /AFP via Getty ImagesTHIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountIn these times of war, sky-high fuel prices, rising inflation and global interest rate hikes, you’d think the stock markets’ so-called fear index would be flashing red, but it’s not and that worries economist David Rosenberg.“The VIX index reflects, to a large degree, the high level of complacency in the marketplace,” the president of Rosenberg Research & Associates Inc. said, referring to the Chicago Board Options Exchange Volatility Index (VIX).This advertisement has not loaded yet, but your article continues below.The VIX, which is supposed to measure real-time volatility in the S&P 500 index, has been hanging around one-year lows of about 15 after spiking in the early days of the United States’s conflict with Iran.Breaking business news, incisive views, must-reads and market signals. 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Please try againVIX readings of zero to 15 indicate some optimism along with very low volatility; 15 to 25 show a certain amount of volatility, but not extreme; 25 to 30 mean there’s some market turbulence and increasing volatility; while anything over 30 indicates a highly volatile market coupled with some extreme swings, according to Toronto-Dominion Bank.“The low level reflects the high level of confidence in the stock market,” Rosenberg said.Other data points are also indicating investor confidence, including a record high reading of Market Vane, which tracks bullish and bearish sentiment amongst markets and investors.“All these charts are lining up, telling you that the market, generally speaking, has a high level of confidence that the returns the S&P 500 is going to deliver now and into the future are going to be rather significant,” Rosenberg said.But he said that confidence is misplaced and that market volatility is coming.This advertisement has not loaded yet, but your article continues below.For one thing, Rosenberg expects there to be less hand-holding by the U.S. Federal Reserve of stock markets given that new Fed chair Kevin Warsh has signalled there will be less forward guidance on where policymakers think interest rates are headed.“Lopsided” markets with everyone in on the same trade are also sending a danger signal to Rosenberg, as are the rising levels of margin debt, which is up 50 per cent over the past year.“When you look at the VIX and you look at market positioning and you look at sentiment and you look at valuations, the only other time I can ever remember in my professional life such a lopsided market was back in the late 1990s,” he said, referring to the period just before the dot-com blowup.Craig Basinger, chief market strategist at Purpose Investments Inc., said global headlines talking about US$100 oil and five per cent bond yields aren’t “market-friendly,” so one would expect a higher VIX.“But behind that, you still have the residual positive influence of a great earnings season,” he said. “AI keeps oscillating, but it’s still largely positive for the market, and then you’ve got decent economic data that really hasn’t fallen out of bed.”This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Furthermore, what was bad news one day gets digested pretty quickly or forgotten by markets.For example, the VIX spiked to about 30 when the war on Iran started, but it rose past 50 on U.S. President Donald Trump’s so-called Liberation Day.“The market just gets used to things,” Basinger said, adding it can react quickly to news while obscuring the longer-term impacts of events. “You know, $100 oil doesn’t cause a recession, but I’m gonna say six months of $100 oil probably does.” Sign up here to get Posthaste delivered straight to your inbox.Canadian consumers pulled back on spending in July, a slowdown after stronger sales during the first half of the year.Retail sales fell by 0.7 per cent monthly to $73.7 billion in July, the first drop since December 2025, according to data from Statistics Canada published on Thursday morning. The decrease followed a 0.6 per cent rise to $74.3 billion in sales in June. — Paula Tran, Financial PostRead the full story here.This advertisement has not loaded yet, but your article continues below.Today’s Data: U.S. durable goods orders, University of Michigan sentiment index, Kansas City Fed services activityEarnings: District Metals Corp., Paramount Group Inc., Farmer Bros. Co.Glen is 45 years old, earns $110,000 a year, but has little savings and $100,000 left on the mortgage on his family home in Northern Ontario. Is it a good idea for him to borrow to invest in a registered retirement savings plan. Find out what FP Answers has to say. The FP Atlantic Economic Report takes you behind the scenes of the business world in Atlantic Canada. We’ll bring you insights from CEOs, government leaders, investors and economists on what’s making the regional economy tick and where it’s heading next. Sign up hereAre you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).This advertisement has not loaded yet, but your article continues below.McLister on mortgagesWant to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.Financial Post on YouTubeVisit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters hereThis advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.