Traders work on the floor of the New York Stock Exchange during afternoon trading on Aug. 2, 2024.
Michael M. Santiago | Getty Images
A key measure of expected volatility in the stock market surged to its highest level in more than four years on Monday morning as global equities fell sharply.
The Cboe Volatility Index, or VIX, broke above 60 on Monday, up from about 23 on Friday and roughly 17 a week ago.
The VIX jumped above 50 on Monday morning.
This is the highest the VIX has been since March 2020, shortly after the Federal Reserve’s emergency actions during the Covid-19 pandemic, according to FactSet. The VIX rose as high as 85.47 in March 2020, according to FactSet.
The VIX is calculated based on market pricing for options on the S&P 500. It is designed to be a measure of expected volatility over the next 30 days, and is often referred to as Wall Street’s “fear gauge.”
Since the Covid sell-off subsided, the VIX has been subdued, often trading below 20.
While spikes in the VIX often coincide with deep market sell-offs, they can also be short-lived and precede a rebound for stocks.
“You have to watch the VIX. When the VIX peaks and starts to roll over and fall down, the recovery can be just as quick,” Fundstrat head of research Tom Lee said Monday on CNBC’s “Squawk Box.”