CNN Fear and Greed Index Plunges to “Extreme Fear” | Commodities

Worry is gripping the financial markets in 2025. CNN’s Worry and Greed Index, a extensively adopted gauge of investor sentiment, has plunged into the “Extreme Fear” zone.

After dipping to 22 on the finish of February, the index had fallen to twenty as of March 4, reflecting deep unease amongst merchants and institutional buyers alike.

This shift comes amid a combine of financial uncertainties and international geopolitical tensions which have left buyers skittish. This contains the US Trump administration enacting tariffs on allies Canada and Mexico on March 4, in addition to the administration pulling away from Ukraine and in the direction of Russia.

Whereas market sentiment indicators don’t dictate future price actions, they supply insight into the emotional state of the market — typically a contrarian signal for savvy buyers. When worry reaches excessive ranges, it has traditionally marked moments of potential alternative or additional market turbulence.

However what does this drop into Excessive Worry actually imply? How is the index calculated? And how have previous situations of such excessive sentiment performed out within the markets?

This text explores the importance of the CNN Worry and Greed Index, its historic context and what buyers ought to watch for subsequent.

What’s CNN’s Worry and Greed Index?

CNN’s Worry and Greed Index is a device designed to measure the prevailing feelings influencing the stock market by weighing seven key indicators.

The Worry and Greed Index operates on a scale from 0 to 100, with a rating underneath 45 indicating worry, a rating of 55 and above signifying greed, and one in between marked as impartial. Scores of underneath 25 and above 75 are labeled Excessive Worry and Excessive Greed, respectively.

​How is CNN’s Worry and Greed Index calculated?

The index aggregates seven key indicators, every reflecting totally different features of market sentiment:

1. Inventory Value Momentum – Compares the S&P 500’s (INDEXSP:INX) present worth to its 125-day transferring average.
2. Inventory Value Power – Tracks the quantity of shares hitting 52-week highs versus these reaching 52-week lows.
3. Inventory Value Breadth – Examines trading quantity in advancing versus declining shares.
4. Put and Name Choices – Analyzes the ratio of bearish (put) choices to bullish (call) choices.
5. Junk Bond Demand – Measures the yield unfold between high-yield (junk) bonds and safer investment-grade bonds.
6. Market Volatility (VIX) – Follows the CBOE Volatility Index, typically referred to as the “fear gauge.”
7. Secure Haven Demand – Assesses the relative efficiency of shares versus authorities bonds.

When these indicators collectively signal heightened warning, the Worry and Greed Index falls into the worry zone, with Excessive Worry indicating widespread pessimism within the markets.

Different situations of Excessive Worry

Understanding previous situations of Excessive Worry can present insights into present market circumstances. The final two notable occasions the index hit Excessive Worry have been August 5, 2024, and December 19, 2024.

1. August 5, 2024: World selloff and financial uncertainty

On August 5, 2024, markets noticed a sharp decline following weak tech earnings and US employment knowledge, accelerated by an sudden rate of interest hike by the Financial institution of Japan leading to buyers attempting to unwind their yen carry trades. This triggered a ripple impact throughout international markets:

• Japan’s Nikkei index plummeted 12 p.c in a single session.
• The S&P 500 fell over 4 p.c amid investor considerations about an financial slowdown.
• The Worldwide Financial Fund (IMF) warned that the volatility could possibly be a precursor to extended instability.

2. December 19, 2024: Federal Reserve’s hawkish stance

Investor fears resurfaced in mid-December when the US Federal Reserve signaled that rates of interest would doubtless stay elevated longer than anticipated. The announcement despatched shockwaves by way of the markets:

• The US greenback surged to a two-year high, weighing closely on rising markets.
• Cryptocurrencies took a hit, with Bitcoin dropping over 15 p.c in a week.
• The Dow Jones Industrial Common (INDEXDJX:.DJI) fell over 1,200 factors as buyers reassessed their outlook for price cuts in 2025.

How do different fear-based indices examine?

Whereas CNN’s Worry and Greed Index is a fashionable barometer of market sentiment, it isn’t the one fear-based indicator price watching. Right here’s how different main sentiment gauges examine:

Crypto Worry & Greed Index

The Crypto Worry & Greed Index tracks investor sentiment within the cryptocurrency market. Crypto markets are significantly delicate to risk-off sentiment, making this index an important measure for digital asset buyers.

The Crypto Worry & Greed Index has additionally dropped into Excessive Worry with a rating of 15 on March 4. This decline coincided with continued geopolitical tensions, significantly US President Donald Trump’s announcement of new 25 p.c tariffs on Canada and Mexico that day.

Doomsday Clock

Although not a financial index, the Doomsday Clock, up to date yearly by the Bulletin of Atomic Scientists, displays international existential dangers, together with nuclear tensions, climate change and geopolitical instability.

As of January 28, 2025, the clock is at 89 seconds to midnight, signaling heightened international uncertainty, which may affect investor sentiment in risk property like equities and cryptocurrencies.

What Excessive Worry means for buyers

The plunge of CNN’s Worry and Greed Index into Excessive Worry territory indicators widespread investor anxiousness. However is that this a warning of additional declines, or a contrarian buy signal?

Traditionally, moments of excessive worry have typically preceded robust market rebounds, as panicked promoting creates alternatives for worth buyers. Nevertheless, not all situations result in quick recoveries — some mark the start of extended downturns.

Key concerns for buyers:

• Financial knowledge: Maintain an eye on employment experiences, inflation knowledge and GDP growth figures.
• Federal Reserve coverage: Rate of interest choices will proceed to be a key driver of market sentiment.
• Company earnings: Weak earnings experiences might exacerbate investor fears, whereas robust outcomes might signal resilience.
• Geopolitical developments: Commerce tensions, international conflicts and macroeconomic insurance policies can shift market sentiment shortly.

Whereas fear-based indicators present beneficial insights, buyers ought to use them alongside basic and technical evaluation to make knowledgeable choices.

Whether or not this second marks a momentary panic or the beginning of a broader downturn stays to be seen, however one factor is evident: buyers must be ready for volatility within the weeks or months forward.

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Securities Disclosure: I, Giann Liguid, maintain no direct investment curiosity in any company talked about on this article.

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.