It's Hard to be a Contrarian When "Fear" and "Greed" Seem Balanced

“Be fearful when others are greedy, and greedy when others are fearful,” fabled investor Warren Buffett says. It’s a hard thing to do. 

If one expects “higher for longer” inflation, for example, some experts might suggest energy equities as a place to be.

source:  Leo Nelissen, Seeking Alpha 

Maybe not this time, analysts at J.P. Morgan have suggested since about April of this year. The possible concern is that investors might not actually be “fearful” about energy assets at the moment. 

Sector assets rose 36 percent in the first quarter and another 10 percent since the Iran conflict began. So there is a valuation angle to be considered. 

And some might not believe inflation will continue to be an issue that outweighs other concerns, from the state of the economy in general to a possible artificial intelligence bust. 

And though market volatility spiked last spring, it has come back down, by late June. 

source: Yahoo 

The VIX (Cboe Volatility Index) is the literal definition of the original "fear gauge" in financial markets. It operates by measuring the market's expectation of future volatility, which heavily spikes when investors are nervous.

The VIX benchmarks suggest a “normal” amount of market fear:

• Below 15: Signals a calm, complacent market where investors are generally relaxed.

• 15 to 25: Represents normal market jitters or standard volatility.

• Above 25-30: Indicates heightened investor concern, panic, or market turbulence.

The point is, to invest in a contrarian manner requires a determination of where market sentiment is positioned. 

Right now, at least where the traditional advice about “where to invest” for inflation protection is concerned, it is not entirely clear where the balance between “greed” and “fear” presently sits. 

A contrarian move requires understanding when one or the other is predominant. And, right now, it doesn’t seem clear that either is predominating.