VIX Index At Three-Year Lows: Does Wall Street's Fear Gauge Foresee A 2024 Stock Rally?
Portfolio Pulse from Neil Dennis
The VIX index, known as Wall Street's fear gauge, is at a three-year low, indicating low investor fear and a positive sentiment towards equities. The S&P 500 and SPDR S&P 500 ETF (SPY) have both gained 24% over the year. The VIX's inverse correlation with equity markets suggests a potential rally, but it cannot predict unforeseen events or guarantee a continuation of the trend into 2024. Investors are advised to be cautious of complacency in the market.
December 20, 2023 | 7:14 pm
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POSITIVE IMPACT
The SPDR S&P 500 ETF (SPY) has mirrored the S&P 500's 24% gain over the year, and the low VIX suggests continued positive sentiment which could support further gains in the short term.
The low VIX indicates a lack of fear among investors, which historically correlates with equity rallies. As SPY tracks the S&P 500, it is likely to be positively impacted in the short term by this sentiment.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 90
NEGATIVE IMPACT
The Barclay's iPath Series S&P 500 VIX Mid-Term Futures (VXZ) tracks the VIX and is inversely correlated with the equity market. The current low VIX suggests a lower demand for VXZ in the short term.
VXZ is likely to experience a negative impact in the short term due to the inverse relationship between the VIX and equity markets. With the VIX low, indicating market confidence, demand for volatility protection like VXZ may decrease.
CONFIDENCE 75
IMPORTANCE 70
RELEVANCE 80