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The VIX index continued its bearish trend this week after the latest Federal Reserve decision. The index slipped to a low of $11.95, its lowest point since December 19. It has crashed by over 61% from its highest level this year and by 85% from its pandemic high.The VIX index is not the only gauge that is in a freefall. The US dollar index (DXY) retreated to $102.65, its lowest level since August 11th. It has dropped sharply from its 2023 highs as the greenback eases against currencies like the euro and Swiss franc.Meanwhile, America’s Treasuries have also staged a strong comeback in the past few weeks. The 10-year Treasury yields dropped to 3.95% on Thursday, down from this year’s high of over 5%. The 30-year yields have also moved to 4.11%.The retreat of the VIX, DXY, and Treasury yields has then led to a major equities rally. For example, the Dow Jones index jumped to a record high of over $37,000. The Nasdaq 100 index and the S&P 500 indices are also nearing their all-time highs.Further, the fear and greed index has moved to the greed zone of 69, helped by market momentum, stock price strength, put and call options, and stock price breadth. The four sub-indices have moved to the extreme greed zone.The key reason for this price action is that the Federal Reserve – and other global central banks – are changing their tune. On Wednesday, the Fed decided to leave interest rates unchanged between 5.25% and 5.50%.In a statement, the bank hinted that it will deliver about three rate cuts in 2024 since inflation is falling. Some analysts believe that rates could fall further than that. Economists at ING see the Fed slashing them by 150 basis points. They noted:
“We look for 150bp of rate cuts in 2024, starting in May, with a further 100bp in early 2025 relative to the Bloomberg collated consensus expectations of 100bp in 2024 and a further 100-125bp in 2025.”
Therefore, analysts believe that America’s equities will continue rising, which will push the VIX index much lower. In an interview with CNBC, Josh Brown of Ritholtz said that the bank had vanquished 9% inflation and that the bear case was dead. In a separate statement, billionaire Jeff Gundlach of Doubleline said that stocks and bonds could continue rising. He expects the Fed could cut by 200 basis points as the economy sinks into a recession.Video Length: 00:03:52More By This Author:Porsche Vs Ferrari Stock: HSBC Analyst Picks A Side Why Is Pfizer Stock Being Punished This Morning? OPEC’s Latest Monthly Report Hints At A Tough 2024 – And Further Supply Cuts To Come
