The stock market's fear index is up. Here's why smart investors aren't selling. The CNN Fear and Greed Index has dropped sharply, reflecting growing investor anxiety amid ongoing geopolitical tensions and concerns about an artificial intelligence infrastructure bubble. The index, which tracks seven market indicators, has moved into extreme fear territory, with six of its components now signaling heightened caution. This includes metrics like the S&P 500's position relative to its 125-day moving average, the ratio of stocks hitting 52-week highs versus lows on the New York Stock Exchange, and measures of stock breadth and options activity. The only indicator not in extreme fear is market volatility, as measured by the VIX, which remains in the "fear" range but not "extreme fear." Historically, the index has reached single-digit levels twice in the past year, both of which coincided with market bottoms. In early April 2025, the index hit single digits just before a strong market rally that lasted until autumn. It dipped again in late November, signaling another potential buying opportunity as the year closed with a strong performance. These instances align with the adage that "buy when others are fearful," suggesting the index effectively captures market sentiment. For investors, the current environment presents a strategic opportunity. The article advises sticking to long-term investment strategies, such as dollar-cost averaging into broad-market index funds like the Vanguard S&P 500 ETF (VOO). This fund has outperformed most actively managed funds over a decade, making it a reliable choice for consistent growth. Investors who prefer individual stocks are encouraged to monitor the Fear and Greed Index, as its single-digit readings often precede market rebounds.#s_p_500 #vanguard_sp_500_etf #new_york_stock_exchange #cnn_fear_and_greed_index #motley_fool_stock_advisor
