Return to the red: ASI turns negative in Q1

Summary

• The Animal Spirits Index (ASI) fell below zero (-0.34) for the first time since October 2023.
• Every component contributed negatively to the index in March, with the exception of the yield curve (the spread between the 10-year and three-month Treasury yields).
• March's print shows that tariff uncertainty has shaken sentiment, and we expect uncertainty to further weigh on the ASI in coming months.

Warning bells

The Animal Spirits Index returned to the negative for the first time since October 2023, falling to -0.34 in March. Previous reports detail the index methodology, but on a basic level, an index value above zero indicates optimism and a value below zero suggests pessimism.¹ March's print shows that tariff uncertainty has shaken sentiment.

The ASI consists of five indicators: the S&P 500 Index, the Conference Board’s Consumer Confidence Index, the yield curve (the spread between the 10-year and three-month Treasury yields), the VIX Index and the Economic Policy Uncertainty Index. The policy uncertainty and VIX indices inversely affect the ASI. That is, a rise in uncertainty or volatility decreases the index, while a fall increases the index, all else equal.

Most components were subtractive in March, with the only lift coming from the yield curve. The spread between the 10-year and three-month Treasury yields has remained in positive territory for all of 2025, helping to boost the ASI in March. Despite its record-breaking year in 2024, the S&P 500 Index has not fared well this year. Since hitting a record high in January, the index has fallen every month since, and fell further in March by 343 bps—the largest monthly decline since 2022. The VIX Index has similarly flashed red this year, climbing to its highest level since before the presidential election.

Download The Full Special Commentary