U.S. stocks have rallied in 2023, as a measure of the market’s fear subsided ahead of the Federal Reserve’s policy meeting this week and as investors weighed company earnings. The CBOE Volatility Index, known as Wall Street’s “fear gauge,” ended Friday at 18.5, “below its long-run average of 20,” Nicholas Colas, co-founder of DataTrek Research, said in a note emailed Monday. That’s down from early January, when the gauge, which trades under the ticker VIX, kicked off the year with a close of 22.9, FactSet data show.
“We have started 2023 with the VIX looking a lot more like 2021 rather than 2022,” said Colas. Stocks rallied in 2021 and then tanked last year as the Federal Reserve embarked on an aggressive campaign raising interest rates to combat high inflation. The S&P 500 was up 6% this month through Friday, compared with a 19.4% loss last year and a 26.9% jump in 2021, according to FactSet data. Colas wrote the lower VIX and “decent start” to 2023 “stem from the market’s belief that the Fed will shortly be done raising rates” and that companies’ earnings can recover …