New york: The VIX Index, a key indicator of market volatility often referred to as the 'fear index,' has surged to its highest level since April, closing at 26.87. This increase is primarily attributed to diminishing expectations of a Federal Reserve rate cut and heightened apprehensions regarding high valuations in technology stocks.

According to Anadolu Agency, the VIX Index had previously reached a peak daily close of 52.33 on April 8 this year, following the announcement of significant reciprocal tariffs by US President Donald Trump. Currently, the probability of a rate cut by the Federal Reserve at its December meeting has dropped to 40% based on money market estimates. This has been compounded by growing concerns over the valuation of tech stocks, which has contributed to increased risk perception in global markets.

Fed Governor Lisa Cook highlighted that a collapse in asset prices might not be surprising, as various risks are impacting the financial system. These include the rapid expansion of private credit markets, hedge fund activities in treasury securities, and the integration of generative artificial intelligence in machine-based trading.

Futures and commodity markets expert Zafer Ergezen informed Anadolu that while the likelihood of a US rate cut had previously surged, it has since decreased, resulting in selling pressure across markets. This pressure has led to the sale of risky assets and declines in commodities such as silver, oil, and bitcoin. Ergezen noted that earlier expectations of an economic recovery tied to a potential rate cut have been dampened by the reduced probability of such a move.

Seda Yalcinkaya Ozer, manager of research at Trkiye-based Integral Yatirim, told Anadolu that despite strong earnings from chipmaker Nvidia, there are significant concerns about a potential AI bubble. These concerns, coupled with uncertainties surrounding the Fed's rate cut decision, continue to create a bottleneck in the market. Ozer mentioned that the likelihood of a December rate cut remains volatile as the meeting date approaches, with Trump exerting continuous pressure on the Federal Reserve.

Ozer further noted that the Nasdaq is on track for its largest weekly decline in a considerable period, closing below its 22-week average of 24,115. If the index maintains this position by the week's end, market attention will shift to key developments that will play a decisive role in shaping risk appetite in the coming week. She cautioned that if the market does not show a strong reaction, the Nasdaq's decline could continue, potentially reaching as low as 22,875 points.