Three market indicators: VIX index rises, the UK's turmoil, Porsche's IPO : The Indicator from Planet Money Sound the alarms because Britain's financial markets are in turmoil. That, plus the upticking 'fear gauge,' and Porsche's vrooming public debut on indicators of the week. Markets edition.

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Indicators of the Week: Markets Edition

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OK, Adrian. Buckle your seat belt because here are some headlines from this week about the markets.


OK. I'm ready.

WONG: Here's headline No. 1 - markets are reeling from higher rates. The world economy is next.

MA: That's a little ominous. OK.

WONG: OK. Here's some more. I'll do them, like, rapid-fire. London stocks dive on fiscal policy nerves, why the stock market sell-off has no end in sight and, my personal favorite, how to protect your 401(k) in a bear market.

MA: Oh, yeah. I guess that last one is, like, trying to make the best of a kind of tumultuous situation 'cause it has been a week in the stock market. So we thought we got to take some of this on for indicators of the week.


WONG: And I'm Wailin Wong. And today we are joined by Erika Beras from Planet Money.

Hello, Erika.

ERIKA BERAS, BYLINE: Hey, hey. Thanks for having me.

MA: (Singing) Erika.

WONG: So this week - three indicators connected to the markets. We will talk about a measurement that tries to quantify fear. We'll wade through the financial turmoil roiling the U.K. And what's that - a bright spot, question mark? - Porsche races to an IPO.


MA: First off, an indicator that captures how people are feeling after this turbulent week in the global markets - it comes from the VIX.

WONG: Oh, I know Vicks. That's the stuff you put on your chest when you have a cold.

MA: Yes, but we are talking about a different kind of VIX. We're talking about the V-I-X, which stands for the volatility index. It's often nicknamed Wall Street's fear gauge, and that is because the VIX measures the level of uncertainty investors are feeling about the direction of the stock market. This past week, the VIX cracked 33. That is nearly 70% higher than it was just back in mid-August.

BERAS: Whoa. That sounds like traders are feeling pretty nervous.

MA: That is a big increase, right? And just to give you a sense of it, like, generally speaking, any VIX number that's, like, above 30 is saying that there is a lot of uncertainty about the stock market. That happened when we saw, for instance, omicron sweeping the country. We also saw it spike above 30 when Russia invaded Ukraine. And it's doing it right now because, well, as we've been hearing, there's a lot of macroeconomic trends that are kind of roiling the global economy right now.

WONG: So how are they measuring investor feelings? I'm picturing, like, in the hospital when you have to point to a smiley or sad face on a spectrum of how much pain you're feeling. Is that what they're doing with traders?

MA: Actually, it's, like, a little more wonky than that. What the VIX is actually based on is S&P 500 options trading activity. And that is kind of a mouthful. So just to break it down, a lot of us have heard of the S&P 500, right? That is a basket of large, publicly traded companies. It's often used as a snapshot of the overall stock market. And S&P 500 options are these financial instruments that let investors bet on which way the S&P 500 is going to go. Is it going to go up in value, or is it going to go down in value? And right now, the trading activity with these options shows, a lot of investors are just not sure. Their mind state is basically just one big shrug emoji. And that is why the VIX is high right now.

BERAS: And I'm going to jump in and say volatility isn't, like, necessarily bad. For people about to retire, you know, that's not great. But for some investors who have time to just ride out the bumps, it could mean some time for them to get their stocks at a slight discount.

WONG: We love a sale.

BERAS: We do love a sale.

MA: That is a really good point. And, you know, even though the VIX is sort of spiking right now, I think it's also important to keep the historical perspective in mind. And if you are feeling kind of nervous about all the headlines about volatility, the VIX, at points, was a lot higher than it is now. Like, for instance, in the Great Recession in the late 2000s, the VIX hit 60, which is, you know, almost double where it is right now.

WONG: Well, speaking of feelings, I would not be surprised if feelings are pretty lousy in the U.K. right now. And that brings me to my indicator - 65 billion pounds. That is the amount of government bonds that the Bank of England said it is prepared to buy over the next couple of weeks to calm a market meltdown.

MA: Oh, OK.

WONG: And what happened was that the new Prime Minister Liz Truss recently announced some big tax cuts, and the reaction was so bad that even the International Monetary Fund said it was concerned these proposals would increase inequality.

So here is Liz Truss being asked on a radio program about these so-called unfunded tax cuts and whether they only benefit the wealthy.


PRIME MINISTER LIZ TRUSS: What we want to do is help grow the economy (inaudible), attract the investment, attract the new jobs.

UNIDENTIFIED REPORTER: But you won't answer, Prime Minister, this question about fairness, this question that all our listeners have been asking me this morning about fairness in these tax proposals that you've made, which have crushed...

TRUSS: But it's not...

BERAS: That is - that's intense.

MA: I love the persistence.

WONG: Yeah. Liz Truss is getting roasted for these tax cuts. And markets are freaking out, which brings us back to this 65 billion pounds in government bonds. So the uncertainty caused by Truss' plan affected U.K. government bonds, especially ones with longer maturities. Their prices dropped. There was a big selloff, and that made interest rates on these bonds go up.

MA: Yeah. And if you only remember one thing from all of our bond talk on this show, it should be this - prices for bonds and bond rates move in opposite directions.

WONG: Exactly. And when rates on these long-term bonds went up, that was really destabilizing for a lot of investors, including pension funds that deal in this part of the bond market. So to help calm the storm, the Bank of England stepped in to buy bonds. Doing that should make prices go up, and that makes interest rates - all together now...

MA: Go down.

WONG: ...Go down. Nailed it.


MA: OK, wait a minute. So the Bank of England is buying bonds, but aren't they supposed to be also, like, doing the opposite with inflation being so high? I mean, that is what central banks worldwide, including our U.S. Fed, that's what they're trying to do. And they're getting rid of government bonds to try and raise interest rates.

WONG: Yeah, that's what makes this story so wild. The Bank of England was trying to shrink its bond portfolio. They're also raising interest rates to combat almost 10% inflation. But now it's making this huge unplanned U-turn and buying bonds again.

BERAS: Well, it sounds like they should buckle up because I'm here with some good economic news because can't all be doom and gloom, right?

MA: It can't.

BERAS: No. So my indicator of the week - are you guys ready? - is 911 million, which is how many shares Porsche put up in its public trading debut on Thursday - 911 in honor of its iconic car, you know, the Porsche 911.

MA: Oh, that's clever. OK.

BERAS: So as we all know, like, IPOs haven't been all, like, sunshine and rainbows lately. But all things considered, Porsche's debut went pretty well. Trading opened at 84 euros. That was 2% over its IPO price. It lost some gains throughout the day and then ended flat - but still kind of exciting for the IPO market, almost like a jolt of hope. It was Germany's second biggest market debut.

WONG: Seems like a big deal because we were just talking about inflation in the U.K. And I know Germany also has really high inflation right now, right?

BERAS: Yeah, it just hit double digits. So this is, like, a big deal. And Porsche's debut raised 19.5 billion euros for its parent company, Volkswagen. That's, like, double all the proceeds raised by IPOs in Europe this year. So going into the first day of trading, there was, like, some optimism there.

MA: I mean, in some ways it kind of makes sense, right? Cars have been a hot ticket item in past couple of years, and Porsche is, like, one of the hottest brands there is - right? - most recognizable, I guess, for a lot of people in the world.

BERAS: Yeah. And, you know, it's all, like, exciting, but it really actually only goes so far. The markets have been, as we all know, down in the dumps. And, like, having, like, one bright and shiny IPO offering may not do very much. And the fact that it went up and then went down again is super interesting because that might be a bad sign. Traditionally, the luxury goods sector generally does better in bad economies because people with lots of money just keep spending.

WONG: Well, those Faberge eggs aren't going to buy themselves.

BERAS: And there's evidence out there that shows, like, that's still the case. Like, Louis Vuitton's parent company, LVMH, that owns a bunch of fancy brands, has had revenue growth, and so has Versace's parent company. And Ferraris are still selling pretty well. So for Porsche, the first day of trading, not bad, but it's flattening. That kind of still speaks to the uncertainty in the economy that we're seeing right now.

MA: This might be a new idea for a index - the fix, the fancy index. Yeah.

BERAS: I'm happy to do all the research for it.


WONG: This episode was produced by senior producer Viet Le, with engineering from Josh Newell. Kathryn Yang checked the facts. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.

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