The VIX index, which indicates fear and volatility in the S&P 500, has fallen by around 10 points since last week as concerns over artificial intelligence (AI) investments in the US eased following the midterm elections, while the situation in the Middle East remains calm.

The Democratic sweep in the midterms last week fueled concerns over AI investments, with some Democrats who opposed AI development winning state elections, raising the risk of increased regulation in the sector.

The “blue tsunami” in the US midterms drove up the VIX index to 28.2 last week, alongside expectations of a new wave of geopolitical risks in the Middle East.

Given growing hopes for a US-Iran deal and rising expectations that Democrats may not hinder the development of AI as much as anticipated, risk perception in the markets declined.

The VIX index fell around six points on Monday to 19.9, thus declining by about 10 points since last week.

Uraz Cay, a global markets strategist at AK Investment, told Anadolu that all eyes had turned to macroeconomic data and corporate earnings.

“Buying in global stock markets increased after strong US nonfarm payrolls, a positive stock price reaction amid a major energy provider to data centers’ third-quarter earnings, and chipmaker TSMC’s better-than-expected October sales,” he said, expecting the bull market to continue after the S&P 500’s historic performance post-midterms.

“We think the recovery in risk appetite will continue through the end of the year and the S&P 500 will see new records,” he added.

Zafer Ergezen, a futures and commodity markets expert, told Anadolu that market tension began rising before the midterms and the sharp sell-offs, especially in AI and tech stocks, signaled a shift toward risk-free returns.

“The main reason for a shift to interest rates and bonds before the elections and outflows from gold, stock markets, commodities, and Bitcoin was high interest rates driven by oil prices,” he said.

“Investors grew to become somewhat risk-averse and we saw a general selling trend in the stock markets, gold, and silver, despite the negative sentiment — we also experienced a decline in the bond market due to the inflow of funds into bonds,” he noted.

Ergezen stated that risk appetite began to rise after the elections and the market shifted to a slightly more optimistic outlook.

“The market thinks the Iran war will end and we’re already seeing this reflected in oil prices, with Brent crude reaching $90 a barrel even without a permanent deal, as well as the fear index declining,” he said.

“It’s become difficult for the Trump admin to continue the war after losing majority, and the expectations that the war is ending is being reflected in recent statements — if we see a lasting agreement, oil will continue to decline, pushing down the fear index even lower, but risk appetite is generally on the rise again with continued interest in stock markets, gold, and silver,” he added. (AA)