The Stock Market Looks Calm. Investors Are Anything But.

This story will be featured in the upcoming Financial Poise Weekly newsletter.

The stock market is looking calm as earnings season winds down. But below the surface, options trading suggests investors are rapidly swinging between fear of a selloff and fear of missing out, leaving the market vulnerable to sudden moves.

According to Christian Dass and Bernard Goyder from Bloomberg:

• The market is pricing in daily S&P 500 moves of less than 0.8% for the rest of August, according to Bloomberg options data, while the Cboe Volatility Index (VIX) ended last Friday at its lowest level in 2026.
• Sentiment has changed quickly. In late July, traders were buying options to protect against a market decline. That quickly gave way to heavy demand for bets on stocks rising as investors rushed to avoid missing out on the rally.
• Traders are becoming “hypersensitive” to those swings in sentiment, and strategies designed to profit from quick market swings are gaining popularity.

Our take? Fear and FOMO may sit at opposite ends of the spectrum, but they can lead investors into the same trap: letting short-term market moves drive long-term decisions.

Sometimes the best response to rapidly changing market sentiment is not to respond at all. As we discuss in Stocks Might Panic, but Investors Shouldn’t, investing with a longer time horizon can help put short-term market swings into perspective.