The stock market's fear gauge just hit a 42-month low. Investors are ignoring a load of risks, hedge fund manager says.

• Wall Street's "fear gauge" registered its lowest weekly close since January 2020 on Friday.
• Boaz Weinstein questioned investors' confidence given their recent and current challenges.

Investors are facing a bunch of risks and challenges but by one measure, they appear more confident today than before the pandemic struck. Boaz Weinstein underlined how absurd that is in a Saturday post.

"Yup, totally makes sense that financial market uncertainty is now less than pre Covid, Inflation, Ukraine, inverted yield curve, high European recession risk, moderate US recession risk, etc.," Weinstein wrote sarcastically on X, formerly known as Twitter.

The Saba Capital Management chief was referring to the CBOE Volatility Index, which on Friday notched its lowest weekly close since January 2020. The VIX is known as Wall Street's "fear gauge" because it tracks the market's expectations of stock-market volatility over the next month, based on the prices of put and call options.

In his post, Weinstein emphasized how much the market backdrop has worsened since the start of 2020. Specifically, a pandemic roiled the global economy and rattled supply chains, inflation hit a 40-year high of 9.1% last summer, and Russia invaded Ukraine, sparking a protracted conflict that has disrupted food and energy markets.

Moreover, short-term US government bonds are paying larger yields than long-term bonds. An inverted yield curve indicates that investors expect the Federal Reserve to cut interest rates within the next few years, suggesting they see an economic downturn ahead.

Saba's founder and chief investor also noted the significant risks of recession in the US and Europe. Recessions tend to weigh on stocks as they dampen companies' growth rates and erode their profits, and drive investors towards safer assets like cash or gold.

Given the flurry of headaches in recent years, and the headwinds still blowing today, Weinstein seemed dumbfounded that investors seem to be more certain about the future now than they did in early 2020.

Weinstein specializes in taking activist positions in discounted closed-end funds, a niche type of mutual fund. He's raised their profile in recent weeks by claiming Taylor Swift invests in them, and Warren Buffett plowed significant sums into them as a young man.