Market euphoria is at a 20-year high

We take another look at the high market valuations while also considering the extremely low levels of fear in the market as measured by the VIX. In the past David Bianco of Deutsche Bank has said if you look at the ratio of the S&P P/E to the VIX it can help identify complacency in the market. This makes sense intuitively because at times when valuations seem high it would reason that people would protect their portfolios if they were expecting a correction. As people buy protection, the implied volatility in the market rises along with the cost of that protection. But we aren’t seeing increased implied volatility. Instead the VIX is hanging out around 10, calm as can be.