Fear and Greed Index Hits Extreme Levels as US Market Volatility Surges
The CNN Fear and Greed Index plunges to extreme fear, signaling heightened investor anxiety amid trade tensions and Fed policy shifts.
The CNN Fear and Greed Index, a key barometer of investor sentiment, has plunged into extreme fear territory, reflecting heightened anxiety in financial markets. As of recent data, the index dropped to single digits, a level not seen since the COVID-19 market crash in 2020.
What is the Fear and Greed Index?
The Fear and Greed Index measures market sentiment on a scale from 0 to 100, where 0 indicates extreme fear and 100 signals extreme greed. It aggregates seven indicators, including stock price momentum, market volatility, and safe-haven demand, to gauge whether emotions are driving stocks to overbought or oversold conditions.
Currently, the index sits at 8, deep in extreme fear territory. Historically, such levels have preceded major market selloffs, including the 30% S&P 500 drop in early 2020.
Recent trade tensions, including escalating US-China tariffs, have rattled investors. Additionally, the Federal Reserve's hawkish stance on interest rates has added uncertainty, with markets reassessing expectations for rate cuts in 2025.
The VIX, Wall Street's fear gauge, has surged alongside the Fear and Greed Index, indicating rising volatility. Meanwhile, demand for safe-haven assets like Treasury bonds has increased, further confirming investor caution.
Historical Context and Market Reactions
Past instances of extreme fear, such as August 2024 and December 2024, saw sharp market declines. In August, weak tech earnings and a surprise Bank of Japan rate hike triggered a global selloff. In December, the Fed's prolonged rate outlook sparked another downturn.
However, extreme fear can also present buying opportunities. Warren Buffett famously advised being greedy when others are fearful, suggesting that panic-selling may create undervalued entry points for long-term investors.
Analysts recommend monitoring economic data, Fed policy signals, and corporate earnings to gauge whether the current fear is justified or overblown. While sentiment indicators don't predict future prices, they offer insight into market psychology.
However, the index was at 70.60 on May 16, 2025, according to MacroMicro. The index was 71 on May 16, 2025, according to CNN.
at the time of preparing this article index is 69 as shown in photo above which is GOOD, generally caution is advised as uncertainty and market volatility is likely to persist in the coming weeks.
