Right now, the prospect of escalating geopolitical conflict in the Middle East has many investors running for the hills. But in fact, Wall Street’s famous ‘fear gauge’ – the VIX – is signaling that they should be doing the opposite. It seems that now may actually be a great time to buy stocks.
The Volatility Index (VIX) is widely considered Wall Street’s ‘fear gauge.’ It measures the stock market’s expected volatility based on S&P 500 index options. So, in that respect, it measures how worried investors are about the market at any given point in time.
It’s a sentiment indicator. And like most sentiment indicators, it is often a contrarian signal.
As the legendary Warren Buffet once said, “It pays to be greedy when others are fearful and fearful when others are greedy.”
That certainly is the case with the VIX – especially so over the past year.
Why the VIX Has Us Bullish on Stocks
Since early 2023, the VIX has typically fluctuated between 12 and 16. But every single time it has spiked above 18, stocks were on the verge of a huge upward rally. In fact, the best times to buy stocks since early 2023 were when the index spiked above 18.
This happened in April/May 2023, when investors were worried about the Silicon Valley Bank collapse and a potential regional bank crisis that could send the economy into a recession. The VIX spiked above 18. But that dreaded recession never arrived. And over the next three months, stocks popped almost 15%.
It also happened in October 2023. Investors were worried that reinflation would force the Federal Reserve to hike rates again. Consequently, the VIX spiked above 18. But inflation proceeded to cool, and the Fed never did hike rates again. Then over the next five months, stocks soared nearly 30%.
And as you might have guessed, the volatility index is spiking above 18 again right now as investors worry about war, reinflation, and a potential recession.
But we think it’s unlikely that these risks will amount to much of anything. Instead, we expect that the U.S. economy will continue to grow while inflation resumes its decline.
And as these risks fade over the coming weeks and months, the stock market should rally in a big way – just like it did in the summer and winter of 2023.
In other words, the VIX is telling us that it is buying season for stocks.
Sure, that may run counter to everything you’re hearing in the news at the moment. But remember: it’s a reporter’s job to scare you with sensationalized headlines and keep watching (or reading) their stuff.
But my job is to make you money.
And the data is telling me that, right now, we have the opportunity to do just that.
The Final Word
We’re telling our readers to buy the dip in stocks right now because we think this pullback will end soon. And when it does, the stocks we’re buying right now should absolutely soar into the summer.
That’s our opinion; but we think time will prove us right.
And we’re pounding the table on one under-the-radar AI stock in particular.
We think it may be the No. 1 way to play the generational AI Boom.
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Of course, while Big Tech titans like Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Nvidia (NVDA), and others are duking it out for AI supremacy…
The real winner of this race may be a ‘dark horse’ startup that most investors haven’t heard of yet…
One that’s backed by one of the richest men in the world, Elon Musk…
And we’ve found a way for you to invest in this promising startup that could shock the world over coming months and years.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.
