The S&P 500's "fear gauge" has dipped to levels last seen before the COVID-19 pandemic took root in early 2020, an indication that volatility may be calming even as U.S. stock markets are seeing fresh record highs.

On April 7, the Cboe Volatility Index, or VIX, settled at 17.16, its lowest close since Feb. 21, 2020, and its sixth straight close below 20. The index represents market expectations for volatility during the next 30 days. The VIX, which was trading at 17.1 on April 8, has not closed below 20 for a full week straight since February 2020.

"Markets appear to be fairly relaxed about the prospect of tail risks at this point," said Michael Hewson, chief market analyst with CMC Markets, in an interview. "Everything appears to be focused on the reopening trade and huge amounts of stimulus, and that's keeping the VIX subdued."

The VIX has fallen nearly 80% from its all-time high of 82.69 on March 16, 2020, when pandemic lockdown measures were instituted worldwide. The decline in the VIX comes as the S&P 500 continues to reach new highs. The large-cap index settled at 4,079.95 on April 8, a new record high and an increase of more than 82% from its trough on March 23, 2020.

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The VIX and S&P 500 have tended to move in matching, but opposite, directions throughout the pandemic.

"The VIX has been making lower lows and lower highs ever since the height of the pandemic," said Fawad Razaqzada, a market analyst with ThinkMarkets. "So the fact that it has fallen to new multi-month lows should not come as surprise at it is just a continuation of that trend."

Razaqzada said he expects investors will continue to seek riskier investments, such as stocks, due to optimism of a strong economic recovery.

That expected recovery has been aided by President Joe Biden's $1.9 trillion stimulus plan, a proposal for trillions more in federal infrastructure spending, and Federal Reserve monetary policy changes, particularly the central bank's plans to keep short-term interest rates at effectively 0% and continue its $120 billion-per-month bond purchase program.

The VIX is receding now, rather than earlier in the ongoing equities bull run, because vaccines are working, monetary and fiscal policy support has bolstered investor confidence, and the economic recovery is underway, Tim Edwards, managing director of index investment strategy with S&P Dow Jones Indices, wrote in an April 8 note.

"Until quite recently, it has not been clear whether the COVID vaccines would work, or whether the distribution program would be successful," Edwards wrote. "But the U.S. has been racing ahead."

Declining hospitalization and mortality rates and surging jobs data are pushing the S&P 500 up and the VIX down, he wrote.

"It's been a long, long tunnel, but we just might be coming out of it," Edwards wrote.