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Panic is slowly fading.

The first chart above is a closeup look at the Vix/10-yr ratio, and the second chart shows the longer-term picture of the same. The market is still nervous (the Vix is still substantially above where it would be in normal times) and holds out little hope for a healthy economy (the 10-yr yield is still at levels that were associated with the Depression), but those sentiments are slowly giving way to the fact that the financial fundamentals in Europe are improving and there are quite a few indicators that show the U.S. economy is improving as well.

The Vix/10-yr ratio was priced to a global catastrophe at its peak in early October, and markets are breathing a tentative sigh of relief that so far nothing all that bad has happened. This year is off to a good start, if only because it's not proving to be as terrible as expected.

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