Hey Income Traders,

Stocks are sitting at or near record highs, and the CNN Fear & Greed Index just printed 31, solidly in "Fear," a point away from "Extreme Fear."

A month ago it read 46. A year ago, 54.

The obvious guess is (jokingly) it’s maybe a fear of missing further upside?

That's not it.

The Fear & Greed Index isn't the VIX. CNN builds it from seven inputs: momentum, stock price strength, breadth, put/call positioning, volatility, junk bond demand and safe-haven demand. Only momentum measures where the S&P 500 sits against its own average. The other six look underneath, and right now they read fear.

Breadth worries me most. Only about 25% of S&P 500 stocks trade above their 50-day moving average, and fewer than half hold above their 200-day. Small caps have dropped about 7.5% since mid-August while the S&P 500 has barely budged. A handful of mega-cap AI names carry the tape. Most of the market underneath isn't coming along.

The bond market makes it worse. The 10-year touched 5.34% Thursday, its highest since 2002, and the 30-year pushed past 5.5% late last month for the first time since 2004. Rate markets now price more Fed hikes over the next year. When stocks get shaky, money usually runs to Treasurys. This time bonds are getting sold too, so there's nowhere obvious to hide. I'd take a routine stock pullback over that kind of fear any day.

None of this clears up in one session. I think these problems stick around a while. Until breadth broadens out or bonds find a real bid, I'm staying picky with stock ideas and favoring names where the fundamentals do the work instead of chasing the index. The story's all under the hood.

Here for a long time…. AND a good time,

Hans