Investor fear is elevated.
How do we know?
VIX, often referred to as the fear gauge is currently at a relatively high level.
So what does investor fear portend for the stock market?
Today’s chart helps answer that question by presenting seven VIX ranges versus the ensuing average S&P 500 12-month gain.
The stock market has, on average, performed better following a relatively high VIX reading.
Currently, VIX comes in at a touch above 30 — a level often followed by above average stock market performance.
A caveat — VIX can go significantly higher than 30.
What is VIX?
The CBOE VIX is an index that quantifies 30-day forward S&P 500 volatility expectations.
What does the VIX tell us?
VIX, often referred to as the fear gauge, tracks expected S&P 500 volatility. As it so happens, VIX tends to rise when the S&P 500 is declining and investors are fearful.
What is a normal VIX?
Since 1990, the VIX has been below 20 (signifying investor complacency) approximately 62% of the time.
Can I buy the VIX?
Yes. There are several ETFs that track the VIX. The largest VIX ETF/ETN is the iPath S&P 500 VIX Short Term Futures ETN (VXX).