Why investors can’t agree on the financial outlook

The quokkaspvixvix , an Australian marsupial about the size of a domestic cat, has full cheeks and a curved mouth that convey the impression—often to delighted tourists—that the critter is smiling. It has been dubbed the happiest animal on Earth. Yet these days it has competition from another species: the American stock investor. The & 500 has already risen by 14% this year. An increase of another 10% would take the index back to its all-time high, set in January last year. Excitement about artificial intelligence has lit a fire under companies seen as potential beneficiaries.Although climbing stock prices represent an impressive turnaround, they are not the most astonishing market shift. That award goes to the collapse in volatility. In the past 12 months the , an index that measures expected volatility in stock prices, using the cost of insuring against extreme moves, has declined by more than half, falling from around 30 to 13. The last time it was so depressed was in early 2020, before the disruption of covid-19, when concerns about stagnation were more common than worries about inflation. Considering that the is sometimes referred to as the “fear gauge”, its low level suggests a quokka-like placidity in the stockmarket.