I Can Tell You What We Don’t Want to Do
Let me introduce you to the VIX. It’s originally designed to measure daily stock market volatility by math junkies at the CBOE. It can be pretty useful in times like these.
People often call it the “fear gauge” because it rises when the stock market moves sharply. It’s not surprising that these spikes coincide with stock market drops:
The VIX vs S&P 500 level Jan 2019-4/3/2025
If you only used this chart, you could make a good argument for investing when the fear index is above 30. This lines up with common investing wisdom:
· “Buy low, sell high. It’s pretty simple”- Jim Rogers
· “Buy when there’s blood in the streets”- Baron Rothschild
· “Be greedy when others are fearful, be fearful when others are greedy”- Warren Buffet
Anyways, this week the VIX went nuts:
So, what’s happened when the Volatility index hits these levels? Here’s a couple charts showing S&P 500 forward returns based on various VIX Levels:
You can interpret these charts however you’d like.
If you’re uncomfortable today (like most of us) you probably have enough money in stocks, this post isn’t a blanket “buy more” recommendation.
But for long-term investors, I’ll tell you what we don’t want to do: Sell