The Cboe Volatility Index (VIX), which is commonly known as Wall Street’s “fear gauge,” is at its highest level since the Covid-19 pandemic struck in early 2020.
A leading indicator of market volatility, the VIX has surged to its highest level in more than four years as stocks selloff around the world amid heightened fears that the U.S. economy is entering a recession.
The VIX briefly broke above 65 on Aug. 5, rising 183% from a reading of 23 on Aug. 2. It has since declined but is currently hovering around 40, its highest level since spring 2020.
The VIX indicator hit an all-time high of 85.47 in March 2020 when the World Health Organization (WHO) declared the Covid-19 outbreak to be a global pandemic.
The Cboe Volatility Index is calculated based on market pricing for options on the benchmark S&P 500 index. It is designed to be a measure of expected volatility over the coming 30 days.
Since the initial Covid-19 market selloff in March and April 2020, the VIX has been largely subdued and frequently trades below its long-term average of 20.
Sharp increases in the VIX often coincide with extended market selloffs. However, in the case of the Covid-19 outbreak in 2020, the VIX spike was short and led to a quick rebound for stocks.