2013: The Year the ‘Fear Bubble’ Popped

by Ed Elfenbein | December 27, 2013 11:00 am

Lately, many investors have been tripping over themselves in an attempt to call the current stock market “a bubble.” Me, I’m in the doubter camp. But what’s interesting is that this question misses a much larger point — we’ve been watching a bubble pop all year.

The bubble was in fear….or the ‘fear bubble’.

Here are a few charts that illustrate this point.

Check out the return of the S&P 500 compared with the Long-Term Bond ETF (TLT[1]):

big12262013 2013: The Year the 'Fear Bubble' Popped[2]

Volatility has also dropped. The S&P 500 had only three days all year of moves greater than 2%. Here’s the Volatility Index (VIX[3]) going back three years:

big12262013a 2013: The Year the 'Fear Bubble' Popped[4]

Check out gold, the favorite Doomsday investment, which has been falling like a rock. This will be gold’s first losing year since 2000:

fredgraph12262013 2013: The Year the 'Fear Bubble' Popped[5]

Even within stocks, safe-haven sectors like utilities lagged the market:

big12262013b 2013: The Year the 'Fear Bubble' Popped[6]

And within bonds, the safety premium between risky and non-risky narrowed dramatically:

fredgraph12262013c 2013: The Year the 'Fear Bubble' Popped[7]

Endnotes:
  1. TLT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TLT
  2. [Image]: http://www.crossingwallstreet.com/wp-content/uploads/2013/12/big12262013.gif
  3. VIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIX
  4. [Image]: http://www.crossingwallstreet.com/wp-content/uploads/2013/12/big12262013a.gif
  5. [Image]: http://www.crossingwallstreet.com/wp-content/uploads/2013/12/fredgraph12262013.png
  6. [Image]: http://www.crossingwallstreet.com/wp-content/uploads/2013/12/big12262013b.gif
  7. [Image]: http://www.crossingwallstreet.com/wp-content/uploads/2013/12/fredgraph12262013c.png

Source URL: http://investorplace.com/2013/12/fear-bubble-vix-tlt-sp-500/
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