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All it takes is a few short moments of reading headlines for cortisol to begin pumping through your veins. But you may be surprised to know that, despite war, surging inflation, interest rates, and energy prices, fear is actually in relatively short supply.

The CBOE Volatility Index (VIX) -- the famed "fear gauge" that tracks investor sentiment on Wall Street -- has remained below the level of bear markets of yore.

Ir/rational Fear Index

Despite the S&P 500 being down 18% this year -- wiping roughly $12 trillion from investors' portfolios -- the index hasn't touched 40 this year, the number most analysts believe signifies pessimism for the market's immediate future. Last week, the VIX hovered in the high 20s, and closed at 27 on Friday. By comparison, during the 2008 financial crisis and at the bleak outset of the pandemic in 2020, the index climbed above 80.

So with all the bad news now, why the relative tranquility compared to those bear markets? Believe it or not, the answer is stability:

  • Rather than the sudden, shock-driven crashes that happened after Lehman Brothers collapsed or Covid-19 effectively shut the world down in 2020, the S&P 500 has been on a steady and relatively orderly cruise south this year. While the market falling consistently is hardly pleasant, it hasn't triggered outright panic.
  • In fact, investors are betting the VIX will end 2022 under 30, because known causes -- mainly inflation and interest rate hikes -- underlie the incremental decline and are expected to eventually smooth out (even if it takes months). "The current behavior is playing out similar to the 2000-2002 dot-com bear market, with no big sudden shocks but sustained high realized volatility," Talal Dehbi, a strategist at PrismFP, told Bloomberg.

Calm Til December: While PrismFP calculates the VIX will end the year at just under 30 -- down only slightly from today -- it should be noted the VIX is above its five-year average of 20. Markets are down after all, but they're still way less fearful than in previous downturns. Maybe this bear is just more cuddly than the last one.