Summary
After a spike in market volatility in February and March, when the U.S. and Israel launched the war in the Middle East, the closely watched VIX Volatility (Fear) Index has fallen back below its historical average of 20, this as the 1Q EPS season kicks into high gear. Meanwhile, stock prices have recovered from correction territory and continue to crawl higher, with the S&P 500 at an all-time high. We can’t say that the recent jump in the VIX a huge surprise. Indeed, in our 2026 Market Outlook, we noted that investor complacency was high, the upcoming Fed chairman transition could be rocky, the AI innovation revolution may stall, and that stock valuations were susceptible in the event of a sell-off in the Information Technology sector. That was our Bearish Case. Our Base Case called for another year of growth in the U.S. economy (and no recession), a modest decline in interest rates, and double-digit EPS growth. Since each of the planks in the Base Case are currently in place, there’s reason to expect that equity prices can continue to push higher. Back to the market, the current fear index reading is south of 19.0, which is below historical average of 20 and is consistent with a period of equity
