What emotion drove the UK market last month?

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Inspired by the CNN Business Fear & Greed Index

Last Update: 31st October 2024

Next Scheduled Update: 9th December 2024

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Current Indicator:

One month ago:

Six months ago:

One year ago:

33.5 (Fear)

57.2 (Greed)

57.1 (Greed)

25.9 (Fear)

7 Fear & Greed Indicators

Monitoring stock performance against its long-term trends helps gauge market sentiment. If the FTSE 100 remains above its 125-day moving average, it signals sustained strength and positive momentum. Conversely, when the index dips below this threshold, it may point to rising uncertainty or cautious behaviour among investors. This momentum metric is a key element in assessing shifts between cautious pessimism and growing confidence in the UK Fear & Greed Index.

Current Indicator: Extreme Fear

Analyzing market breadth is crucial to understanding the overall strength of the stock market. The 10-day rate of change in the FTSE All Share Index Advance/Decline Line measures how many stocks are advancing versus declining over time. A rising line indicates broader participation in market gains, signalling stronger investor confidence. Conversely, when declines outpace advances, it points to growing caution. This metric helps gauge whether market moves are driven by a broad base of stocks or just a select few, making it a key indicator for assessing the balance between market optimism and fear.

Current Indicator: Extreme Fear

The FTSE 100 McClellan Volume Summation Index measures market breadth by evaluating the balance between advancing and declining stocks in terms of volume. A higher index value indicates that a larger volume of shares is rising than falling, which signals stronger market participation and potential bullish sentiment. On the other hand, when the index declines, it reflects a weakening breadth, with more shares falling than rising. This tool helps to capture underlying shifts in market momentum, showing whether strength is broadly distributed or concentrated in fewer stocks.

Current Indicator: Neutral

The FTSE 100’s 5-day average put/call ratio reflects investor sentiment regarding future price movements. A put option represents a bet on falling prices, while a call option indicates a more optimistic outlook. When the ratio of puts to calls rises, it typically signals increasing caution or fear among investors, as they seek protection against potential declines. A ratio above 1 often suggests bearish market expectations, while a lower ratio points to greater confidence. This metric is a valuable tool in assessing shifts between risk aversion and market optimism.

Current Indicator: Neutral

This chart compares the percentage difference in 20-day returns between UK equities and government-issued bonds, providing insight into investor preferences for risk versus safety. When stocks outperform bonds, it reflects higher risk tolerance and market confidence. Conversely, when bonds outperform stocks, it indicates rising demand for safer assets, typically seen during periods of uncertainty or fear. This measure helps gauge shifts in investor sentiment between seeking growth through equities and opting for the stability of government bonds, signaling broader market concerns or optimism.

Current Indicator: Neutral

The FTSE 100's volatility, as measured by the GARCH model, plotted alongside its
50-day moving average, reflects expectations of future price fluctuations. Volatility tends to rise during periods of market stress or uncertainty, and decline in more stable, bullish environments. A spike in volatility often signals heightened concern, while a drop indicates greater confidence. The data for this chart is sourced from NYU Stern’s V-Lab, which provides a comprehensive view of market risk. Monitoring the relationship between current volatility levels and its moving average offers valuable insights into shifts between fear and stability in the market.

Current Indicator: Fear

This chart illustrates the option-adjusted spread (OAS) of the S&P U.K. Investment Grade Corporate Bond Index. The OAS represents the additional yield investors demand for holding corporate bonds over risk-free government bonds, adjusted for embedded options. A widening spread indicates that investors are seeking higher compensation for taking on credit risk, signaling concerns about the broader market or specific issuers. Conversely, a narrowing spread reflects increased confidence in corporate creditworthiness. Monitoring these shifts is essential for gauging risk sentiment in the bond market, particularly during periods of economic uncertainty.

Current Indicator: Fear

What is the UK Fear & Greed Index?
The UK Fear & Greed Index, inspired by the CNN Business Fear & Greed Index, is a tool designed to measure overall investor sentiment in the UK stock market. It reflects whether market participants are driven by optimism and risk-taking, or by caution and risk aversion. By capturing shifts in sentiment, the index helps investors understand the prevailing mood in the market, which can signal potential turning points, such as overvaluation during periods of greed or undervaluation during times of fear.

How is the UK Fear & Greed Index calculated?
The UK Fear & Greed Index is derived from a proprietary mathematical model that evaluates the current state of the market in comparison to historical financial data. The model further incorporates short-term momentum for each of the key factors, ensuring an up-to-date reflection of market sentiment. These factors include market momentum, stock price strength, stock price breadth, put and call options, corporate bond demand, market volatility, and safe-haven demand. Each indicator's performance is measured against its historical average, and the model assigns equal weighting to every factor. The index then produces a score between 0 and 100, with 0 representing maximum fear and 100 indicating maximum greed.

How often is the UK Fear & Greed Index updated?
The index is periodically updated at the beginning of each month.

Disclaimer
The UK Fear & Greed Index presented here is a model created and managed independently by Rohan Malik. It is important to clarify that CNN Business, any other financial institution, or third-party entity does not run, sponsor, endorse, or have any involvement with this index. The model used to calculate the index is based on publicly available financial data and custom-designed algorithms; however, I do not make any representation or warranty, express or implied, as to the accuracy, completeness, timeliness, or suitability of the data and analysis provided herein.

This index is solely intended for informational purposes and should not be construed as financial, investment, or trading advice in any capacity. The UK Fear & Greed Index should not be the sole basis for any investment decision, and it is advised that individuals perform their own research and consult with licensed financial professionals before making any financial or investment decisions. The creator of this index is not a registered financial advisor, broker, dealer, or analyst, and does not provide any professional investment advice or services.

Any use of this index, its data, or its outputs is entirely at your own risk. I, the creator of the UK Fear & Greed Index, disclaim all liability for any direct, indirect, incidental, or consequential losses or damages arising out of or related to the use of this index or reliance on any information provided herein. Market conditions are inherently unpredictable, and past performance or data patterns suggested by this index should not be interpreted as indicative of future results.

It is also important to understand that financial markets involve substantial risks, and the outputs of this index do not guarantee any specific outcomes or financial returns. The data analyzed for the construction of this index may be subject to revisions, inaccuracies, delays, or interruptions, which could impact the performance or interpretation of the index. While I strive to ensure that the data utilized is accurate and updated periodically, no guarantees are made in this regard. This includes, but is not limited to, data collected from third-party sources, historical information, or any market-based calculations that influence the index.

Additionally, the UK Fear & Greed Index does not account for the individual circumstances, risk tolerances, or financial goals of any person or entity. You are solely responsible for determining whether any investment, strategy, or financial decision is appropriate for your specific situation based on your objectives and risk tolerance.

By accessing or using the UK Fear & Greed Index, you agree that I, Rohan Malik, and any associated parties shall not be held responsible for any damages or losses incurred as a result of reliance on this index. I reserve the right to modify, suspend, or discontinue the availability of the UK Fear & Greed Index at any time, without notice or liability, and do not guarantee that the index or its data will be available at all times or will operate without interruption.