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The VIX has fallen about 27% since the end of September.
NYSE
If the expected volatility in the stock market falls to a key level – one not so far away – shares may have a strong tail.
The
CBOE variability index
(ticker: VIX), known as Wall Street’s “fear measure” and which measures how furious investors expect stock prices to move, has been largely flat in the last few months gone. But it has fallen 27% to 20.6 since September 23, the start of a new stock rally, as investors have become increasingly optimistic about the global economic recovery. The
S&P 500
has received about 21%.
If the VIX continues to fall, the level to look at is 20, Fundstrat Global Advisors head of research Thomas Lee wrote in a note. That’s just a rub away from the current level. “We see a definite under-20 movement as important,” Lee said.
Not only would the expected volatility be so low indicating optimism for a broader stock, but it would also be likely to buy quickly from a hedge fund using mathematical models, monitoring a range of indicators. , to find investment opportunities, Lee suggested. Capital would pour into stocks, more than make up for downward pressure from anyone who sold.
The cash flow into stocks is picking up anyway. Net funds entered $ 58 billion last week, according to data from the Bank of America, bringing the largest inflows of both to big-cap currencies and a small cap.
“Part of the move to allowances reflects optimism across the economy as we enter the second half of this year,” said Michael Sheldon, chief investment officer at RDM Financial Group. Barron’s, before adding that the strong interest in stocks could be an indication that prices are close to the highest level for the short term. Prices are high.
Prices will not always move in a gray phase with capital flows soon, but it is worth noting that, as the money was poured in, the S&P rose. 500 just under 1% this week. Russell’s 2000 index of small caps gained more than 2%.
Investors are pledging that corporate earnings will continue to rise into 2022 as more people get the vaccine for coronavirus, allowing businesses to reopen. Families tend to spend time in areas such as travel and outdoor dining once they have the chance. Pandemic relief funds continue to pour into the economy.
The path for stocks looks good, but mutation of a virus that cannot handle routine vaccines could be put off by making it harder for businesses to reopen.
Write to Jacob Sonenshine at [email protected]