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Investing.com — The , often referred to as the market’s “fear gauge,” fell 5% on Tuesday, reapproaching four-week lows. This decline reflects a significant reduction from December’s peak, when the index spiked 74% to $27.62 following the Federal Reserve’s announcement of a more conservative approach to its rate-cutting strategy.
The VIX’s recent downturn coincides with the inauguration of the new U.S. President, which took place yesterday. The administration is reportedly considering a delay in tariffs that have been regarded as potentially inflationary measures that could push interest rates higher. This political shift appears to be injecting a sense of calm into the markets, leading to a decrease in the VIX as investors anticipate a less aggressive rate environment.
While the VIX is a measure of market volatility and not a stock, its movements are closely watched by investors as an indicator of market sentiment and potential future volatility. The index is down nearly 50% from its December highs, suggesting a more stable market outlook as the new administration takes its first steps in setting economic policy.
It’s important to note that the VIX is a real-time market index representing the market’s expectations for volatility over the coming 30 days. Investors use the VIX to gauge the level of risk, fear, or stress in the market when making investment decisions.
As the market adjusts to the new political landscape and its implications for trade and economic policies, the VIX’s movements will continue to be a key barometer of investor sentiment. However, it remains to be seen how the new administration’s policies will ultimately impact the economy and market volatility in the longer term.
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