CNN Fear and Greed Index Plunges to Lowest in Five Years — What it Means
Investor anxiety is reaching new heights. CNN’s Fear and Greed Index plunged to just three on April 8, marking its lowest level since March 2020, when COVID-19 lockdowns sent shockwaves through financial markets.
The index has since made a modest improvement and is sitting at eight.
These levels reflect sentiment not seen in over five years. Historically, fear of this magnitude correlates with significant market selloffs. For instance, in 2020, the index remained in single-digit territory from March 5 to 23 — a period when the S&P 500 (INDEXSP:.INX) lost more than 30 percent of its value during the early stages of COVID-19.
Economists and traders alike warn that fluctuations in this range can be short-lived, but tend to bring extreme volatility, often resulting in steep market declines. Although the first signs of recovery usually emerge once the Fear and Greed Index climbs above 10, a more reliable signal is a return above 25, which tends to precede sustainable rallies.
US President Donald Trump’s tariffs are behind the latest nosedive. Although a 90 day reprieve has been announced for most countries, uncertainty about the future remains. In addition, tensions between China and the US are heating up — US tariffs on China have ballooned to 145 percent, and China has raised its tariffs on US goods to 84 percent.
The immediate market reaction was negative. US stock markets experienced a sharp decline, and although there’s been some recovery, investors are increasingly concerned about the potential for these trade disputes to escalate into a global recession, contributing to the heightened levels of market fear reflected in the index.
While market sentiment indicators like the Fear and Greed Index don’t dictate future price movements, they do provide insight into the emotional state of the market — often a contrarian signal for savvy investors. When fear reaches extreme levels, it has historically marked moments of potential opportunity or further market turbulence.
So what does this latest drop in the Fear and Greed Index really mean? This article explores the significance of the CNN Fear and Greed Index, its historical context and what investors should watch for next.
What is CNN’s Fear and Greed Index?
CNN’s Fear and Greed Index is a tool designed to measure the prevailing emotions influencing the stock market by weighing seven key indicators. The Fear and Greed Index operates on a scale of zero to 100, with a score under 45 indicating fear, a score of 55 and above signifying greed and one in between marked as neutral.
Scores of under 25 and above 75 are labeled “extreme fear” and “extreme greed,” respectively.
How is CNN’s Fear and Greed Index calculated?
The index aggregates seven key indicators, each reflecting different aspects of market sentiment:
- Stock price momentum — Compares the S&P 500’s current…
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