The Tell: Wall Street’s ‘fear index’ is giving stock-market investors a wrong reading, says Goldman

Something is off with one measure of volatility on Wall Street.

According to Goldman Sachs strategists, the Cboe Volatilty Index VIX, +2.21% often referred to as Wall Street’s “fear index,” is too low given the recent gyrations of the S&P 500 index SPX, +0.09%

Goldman analysts Rocky Fishman and John Marshall said that the VIX, which uses options bets on the S&P 500 to reflect expected volatility over the coming 30 days, has been hovering at or below 13, marking its lowest level since around January (though it is tipping up in Monday trade). Its current level takes the gauge of implied volatility, which tends to rise when stocks fall and vice versa, well below its historic average at about 19.5 since the fear index ripped higher in February.

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