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After a jittery first half of the year, markets are catching their breath. The latest numbers from S&P Dow Jones Index Dashboard: Risk & Volatility Report show that investor anxiety has dropped sharply — and stock prices are climbing once again.

At the heart of this shift is the VIX, known as Wall Street’s “fear gauge.” It tracks expected volatility in the S&P 500, and it just fell to 17, a significant drop from earlier this year. For perspective, that’s well below the 1-year average of 19.8, signaling a market that’s regained its footing — at least for now.

Shorter-term measures of nervousness are even calmer. The 1-day volatility index (VIX1D) fell by more than half to 10.94, suggesting traders aren’t expecting any major surprises in the immediate future. The 9-day VIX also dropped sharply to 13.77.

What does this mean for everyday investors? Simply put: Wall Street is feeling more relaxed. That mood is mirrored in stock performance, with the S&P 500 up 4.8% over the past month.

But it’s not just U.S. stocks showing signs of stability. Volatility dropped across the board in Europe, Asia, emerging markets, and commodities like oil and gold. The one exception? Interest rates — where volatility has risen slightly in both the U.S. and Japan, likely due to ongoing uncertainty about future central bank decisions.

Meanwhile, there’s been a shift in what’s driving market moves. As earnings season gets underway, investors are turning their attention away from big-picture worries and focusing more on individual companies. This is reflected in a jump in the S&P 500 Dispersion Index, which measures how differently individual stocks are behaving. It’s now at 32, up 5 points, suggesting that company news is starting to matter more than headlines about inflation or geopolitics.

This return to fundamentals is good news for long-term investors — especially those who’ve diversified their portfolios. Over the past year, stocks, bonds, and commodities haven’t moved in lockstep, unlike during the pandemic years. That means owning a mix of assets is once again providing real protection, just as classic portfolio theory intended.

Interestingly, the drop in volatility has also been a gift to certain trading strategies. Funds that bet on falling volatility — like those tracking the S&P Daily Inverse Short-Term VIX — gained 15% over the last month, though they remain down over 30% for the year.

In short, calmer waters have returned — but investors would be wise to stay alert. With earnings season in full swing and rate decisions still looming, market tranquillity might not last forever.

You can find the entire report here.

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