Brian Garrett spends his days watching what traders are willing to pay to protect themselves, and last week the answer was almost nothing. The Goldman Sachs derivatives trading chief says the U.S. stock market is now “refusing to price any panic,” even as a measure of stress in the bond market sits at an extreme.
The numbers tell the story in two halves. Goldman’s Panic Index closed below 1 on Friday, and the Cboe Volatility Index, the VIX, held in the low teens. Both are readings that say equity investors see smooth water ahead. Yet the MOVE index, which measures expected volatility in U.S. Treasuries, has climbed to roughly the 100th percentile, a level that says the bond market sees something very different.
That divergence is the warning. Equities and bonds usually tell the same story about risk, or at least neighboring ones. When the two measures fly apart this far, Garrett said, it is a rare structural signal, and it is flashing at a moment when the calm on the surface is already hard to reconcile with what is happening underneath.
Beneath the headline indexes, the market is narrower than it looks. Fewer than half of the stocks in the S&P 500 now trade above their 200-day moving average, a threshold technicians use to separate healthy trends from broken ones. At the same time, the number of stocks hitting 52-week lows has outnumbered those hitting 52-week highs for nine straight trading days.
The last time those two conditions held at once, sub-50% breadth and nine straight days of more new lows than new highs, was the top of the dot-com bubble in 2000, according to Garrett’s analysis. That is the historical company the current market keeps, and it is not the comfortable kind.
The mechanics explain how both things can be true. A handful of the largest companies, the ones tied to artificial intelligence, have carried the S&P 500 higher while the rest of the market grinds sideways or down. The index is a weighted average, and when the weights are concentrated at the top, the average can look calm while the majority of stocks are already in a bear market. A broad index held up by a few names is not broad strength; it is a small number of winners with a large number of shareholders in the denominator.
Garrett’s point is not that a crash is imminent. It is that the market has stopped charging for the risk of one. When volatility is cheap, positioning builds on the assumption that nothing will move, and that assumption is exactly what makes the eventual move sharper when it comes. Low implied volatility is not the same as low risk; it is the market’s collective statement that it is not worried, and that statement has been wrong before.
The bond market, for its part, has no such confidence. The MOVE index at the 100th percentile reflects a Treasury market that has been repricing hard on the question of what the Federal Reserve does next, with yields moving in a way that says the easy-money era is being questioned. The two markets are looking at the same economy and reaching opposite conclusions, and only one of them is hedged.
The divergence also cuts against the usual narrative about the AI rally. The stocks that have led the market higher are trading as if their future is certain, while the bond market is repricing the very borrowing that finances the buildout. The equity side has priced the boom; the credit side has begun to price the bill.
History offers no clean map for what comes next. In 2000, the breadth collapse preceded the top by months, not days, and the indexes kept climbing after the warning signals first fired. The conditions Garrett describes are not a sell order; they are a description of how the last great bull market ended, and how the early part of an ending can look, from the outside, a lot like calm.
The setup also matters for how investors are positioned. In a narrow market, funds that own the index are effectively owning a handful of stocks, and the protection they buy against a downturn is calibrated to the calm headline, not to the churn underneath. That gap between where the risk actually sits and where the hedging is priced is the kind of mismatch that has historically turned an orderly retreat into a scramble.
The question that follows is which side is right. Either equity investors are correctly pricing a soft landing that the bond market has yet to accept, or the bond market is correctly pricing stress that equity investors have decided not to see. Garrett did not pick a side. He noted only that the market is refusing to price the panic, which is not the same as saying there is none.
